Energy: Electricity Supplies

Lord Ezra: asked Her Majesty's Government:
	What steps they are taking to secure the short-term reliability of electricity supplies.

Lord Bach: My Lords, the provision of electricity to meet consumer demand is the responsibility of electricity supply companies. National Grid is responsible for ensuring adequate and reliable network capacity and for carrying out the residual electricity balancing activity. The electricity network has been well over 99.99 per cent reliable in recent years and National Grid indicates that for the summer and coming winter demand should be met in full in all but the most extreme circumstances.

Lord Ezra: My Lords, I thank the noble Lord for that reply. Does he agree that at least 10 years are likely to elapse before large new generating capacity, whether nuclear or other, to replace the present ageing capacity can come into operation and that the major impact of the recently announced renewable energy strategy will also occur at about the same time? Is it not a fact that most of the Government's energy policy declarations have been of a long-term nature? In those circumstances, is there not a case for an urgent review of short-term electricity prospects, with a view to the maintenance of security of supply and the avoidance of any further system failures?

Lord Bach: My Lords, I respect very much the noble Lord's reputation in this field, but I am afraid that I cannot agree with him when he suggests that 10 years are likely to elapse before large new generating capacity comes into operation. Significant new generation capacity is already being delivered. By 2010, 8 gigawatts of new capacity presently under construction should be available. There is already consent for 2.5 gigawatts more and there are outstanding applications for consent for almost another 4.5 gigawatts. That amounts to 15 gigawatts, which is equivalent to around 20 per cent of current generation capacity. Of course, I understand the problems that the noble Lord mentioned, which the Government are addressing.

Baroness Miller of Hendon: My Lords—

Lord Howell of Guildford: My Lords, the noble Lord, Lord Ezra, makes a very acute point. Is not the central consideration, which I say with respect the Minister has slightly missed, that over the next seven or eight years we have to retire almost 40 per cent of existing generating capacity, from ageing nuclear, the ageing coal plants and various other sources? What will fill that 40 per cent gap? Even if we start building nuclear tomorrow morning, it is too late now for us to fill the gap with nuclear. There is talk of more gas, although the Russians are tricky suppliers. The idea that wind farms can fill the gap is totally unrealistic. What will fill the gap to prevent real power cuts and electricity rationing?

Lord Bach: My Lords, as the noble Lord suggests, over the next decade 22.5 gigawatts of generating capacity may close as coal and oil generation become subject to increasingly stringent environmental standards. Indeed, by 2020, our electricity generating system will need to be larger than at present in order to provide back-up for wind generation. However, the central scenario of the renewable energy strategy, which I had hoped that the party opposite would support, sees an investment of around 30 gigawatts of new renewable capacity and a further 17 gigawatts of new conventional capacity. I am sorry that the party opposite seems to have turned its head against any new coal-fired power stations because, as part of the mix, it is essential that we should consider having some of those, too.

Lord Tanlaw: My Lords, did not the noble Lord omit in his reply the one sure way of increasing the reliability of electricity supply, which is to reduce the winter peak load through the application of a daylight saving policy? That is the way in which at least 78 more enlightened countries now enjoy a reliable grid and lighter winter evenings. Where is the statistical proof that the darker evenings policy, which his Government and the Opposition have pursued since 1971, has reduced by one iota the winter peak load, household electric bills, road deaths or the grid's ever increasing carbon footprint?

Lord Bach: My Lords, I think that the noble Lord has wide support throughout the House for what he has to say. I will make sure that, yet again, this is passed back to the Government. No doubt the Opposition have also heard what has been suggested.

Lord Christopher: My Lords, I should like to ask my noble friend two questions. Has he any information on how much we are relying on electricity from France and how far does that relate to assurances for the future? Given the problem that has been described by the opposition Front Bench, could the answer be a partnership in nuclear energy with France?

Lord Bach: My Lords, we have close relations with our neighbours in France regarding the generation of electricity. I do not have the details that my noble friend asks for, but the fact remains that the relationship is close and important. Currently, quite a lot of our electricity comes from French nuclear reactors, perhaps 30 miles off the English coast.

Lord Redesdale: My Lords—

Baroness Miller of Hendon: My Lords—

Lord Rooker: My Lords, the noble Baroness has tried to get in about three times.

Baroness Miller of Hendon: My Lords, is the Minister aware of the reply given to the noble Lord, Lord Stoddart, by his colleague, the noble Baroness, Lady Vadera, on 23 June when she said that wind, due to its intermittency, was not the best source for energy supply? In these circumstances, why do Her Majesty's Government continue to subsidise wind power in such a huge way when new nuclear build would, if they were prepared to help, ensure security of supply and low climate change? Perhaps even better, it would ensure that our Prime Minister did not have to go to Saudi Arabia with a begging bowl.

Lord Bach: My Lords, I heard my noble friend Lady Vadera answer the noble Baroness's Question nine days ago. I thought that my noble friend made the extraordinarily good point that, thank goodness, and perhaps through the noble Baroness's good influence, the wobble that the Opposition had on nuclear power now seems to have disappeared. I am delighted to hear that. We believe that wind power will play a very important part in the mix in future, but so will nuclear, and it is this Government who have had the courage to take that decision.

Baroness Miller of Hendon: My Lords—

Lord Redesdale: My Lords—

Lord Rooker: My Lords, we are into the eighth minute—it is time to move on.

International Development: World Food Prices

Baroness Quin: asked Her Majesty's Government:
	What changes they have introduced and plan to introduce to their development aid policies as a result of increased world food prices.

Lord Tunnicliffe: My Lords, the Government are deeply concerned about the impact of higher food prices on developing countries. While our policies in food and agriculture are robust and flexible, we are reprioritising our efforts and have committed £585 million to address this challenge, of which £121 million will be spent this year. The UK is also urging the international community to double its efforts to tackle global poverty and hunger, and to join together in a global partnership for agriculture and food.

Baroness Quin: My Lords, I thank my noble friend for that reply; I welcome the increased aid package as well as the aid record of the Department for International Development since it came into being. Has aid to individual countries had to be reprioritised as a result of this, particularly given that the IMF recognises that the Horn of Africa and the west of Africa in particular have been very badly affected by the crisis? What mechanisms have been set up across government, not only by DfID by also by Defra, the FCO and the Department for Business, Enterprise and Regulatory Reform, to ensure a co-ordinated government approach to this vital issue?

Lord Tunnicliffe: My Lords, the reaction of Her Majesty's Government has been principally through international programmes, particularly the World Food Programme, which has been very successful in responding to the general problem. Countries that we have helped specifically include Sierra Leone, with interim one-year budget support of £10 million. We have also helped Sudan, with an extra £40 million contributed to the UN common humanitarian plan. To Kenya, DfID contributed £5 million and, as an immediate response, is also offering £2.5 million of low-interest loans. On internal co-ordination, I am not sure that Her Majesty's Government could do better than the current integrated policies of DfID, which seeks to look to the future and to long-term investment to solve poverty issues.

Baroness Rawlings: My Lords, does the Minister not agree that one of the significant contributors to increased world food prices, apart from the rise in the cost of fuel, is the lack of infrastructure in certain developing countries that inhibits the safe and sound transportation of goods? When the Minister, who today expressed the Government's concern, last answered a similar Question, he said that there was no food shortage. What conversations has he had with the Foreign Office about encouraging the countries concerned to invest more adequately in their local infrastructure so that the benefit of our aid policies, with regard especially to food, has maximum effect?

Lord Tunnicliffe: My Lords, I generally agree with the thrust of that question and so do the Government. The Government's response to an emergency is almost never to give direct food aid but to provide it locally to retain and grow the local infrastructure. Part of our aid to Sudan, for example, is for creating new infrastructure. We sincerely believe that we have to look to the next five years, and infrastructure and research are key parts of that.

The Lord Bishop of Southwell and Nottingham: My Lords, given that the United Nations World Food Programme has budgeted $5 billion to feed 90 million people this year, and that barely half of it has come in so far, how confident is the Minister that the rest of the money will come in? What leverage can he use with our EU partners? What would he like to say to churches and charities about any part that they can play?

Lord Tunnicliffe: My Lords, I find it difficult to answer the question without suggesting that the world has properly reacted. The World Food Programme had spent 50 per cent of its money by the end of June—half way through the year; it has asked for another $755 million from the world community, which it has received. The EU has paid its part. The charities play an important part, particularly since the money tends go in-country and maintains infrastructure. Their support is greatly welcomed.

Lord Vinson: My Lords, is the Minister aware that some 500 million tonnes of GM soya have now been consumed without damage to anybody and without any litigation in sight, and that 12 million Indian children do not get rickets because an iron gene was put into the GM rice that India now exports? Will the Government review their whole GM policy, because GM food represents one of the ways in which it can feed itself through the use of fewer fertilisers, less water and better products?

Lord Tunnicliffe: My Lords, the UK Government do not believe that GM foods will solve the world's problems, but they have the potential to make a very important contribution. It is the role of developing countries to make their own decisions about whether to use them. We are contributing through aid for education and research, so that the individual countries can see both the benefits and threats and make their own decisions.

The Earl of Sandwich: My Lords, has the Minister noticed a very sensible suggestion from the World Food Programme to exempt humanitarian and UN agencies from the export ban which does so much damage to the use of regional surpluses? It is an emergency measure that the Government should support.

Lord Tunnicliffe: My Lords, my understanding is that Europe is supporting a temporary relaxation of that ban. If that answer is not correct, I shall follow it up with the noble Earl later.

Earl Ferrers: My Lords—

Baroness Tonge: My Lords—

Lord Rooker: My Lords, it is the turn of the Lib Dems.

Baroness Tonge: My Lords, the world is having trouble now feeding its people. Could the Minister tell us how the world will cope when the population has risen from 6.5 billion now to 10 billion by 2050? Are the Government making an effort to ensure that policies are in place so that non-coercive family planning and the supplies necessary are available worldwide to help to curb population growth?

Lord Tunnicliffe: My Lords, those are two very big questions, and I fear that I can answer only one of them. The general position on food by the World Bank is a belief that global production needs to increase by 50 per cent by 2030. That is an entirely achievable prospect provided—in a sense—that the world gets its act together. Our contribution is an extremely important £400 million investment over five years in agricultural research, which will help the world to equip itself for that challenge.

Earl Ferrers: My Lords, following on from the noble Baroness's question, does the Minister realise that it took all the time from the pharaohs, the Greeks and the Romans to get up to 3,000 million people in the world by 1960, and that within 60 years—the lifetime of some people still on this planet—the population will be multiplied four-fold? How does the Minister reckon that those people will be fed if Governments and the European Union perpetually take a short-term view?

Lord Tunnicliffe: My Lords, certainly Governments in the G8 and the European Union are taking a long-term view. We believe that there are long-term solutions and we are committed to them.

Olympic Games 2012: Transport

Lord Williams of Elvel: asked Her Majesty's Government:
	Whether they will issue guidance about the refurbishment of those transport points in London which will experience high numbers of passengers during the 2012 Olympic Games.

Lord Bassam of Brighton: My Lords, the Olympic Delivery Authority is responsible for delivering transport for the 2012 Games. The ODA outlined its proposals in the first edition of the Olympic transport plan, published in October 2007. Future editions of the plan will become more detailed; it includes temporary and permanent works at a number of stations to provide for passenger demand during the 2012 Games and beyond.

Lord Williams of Elvel: My Lords, I thank my noble friend for that Answer, but is he aware that many important transport hubs in London are a complete mess? That mess needs to be cleared up before the Olympics. One such mess is South Kensington Underground station. Transport for London seems to speak with two voices; one is that of property development, which says that we have to build a Shangri-La over the top of the station; the other is the operating side, which says that we have to clean the whole thing up. Can we please issue guidance to Transport for London, saying that it should forget Shangri-La, clean up the mess in South Kensington Underground station and get it operational in time for the Olympics?

Lord Bassam of Brighton: My Lords, I am grateful to the noble Lord for the question. I understand that South Kensington station has been the subject of protracted disputation over several years. My current understanding is that London Underground Ltd wishes and needs to upgrade the station and therefore an improvements programme is being prepared, which is scheduled to start towards the end of 2009. The programme is likely to comprise the partial enlargement of the ticket hall; the provision of step-free access, such as lifts for those with a mobility impairment; the construction of an elevated walkway above the District and Circle lines, linking the ticket hall; the refurbishment of existing elevators; and a general redecoration of the station. I also understand that it is consulting on wider redevelopment outside and above ground, involving part of the station building, which is grade 2 listed. That consultation is being undertaken in conjunction with the local Royal Borough of Kensington and Chelsea.

Lord Berkeley: My Lords, one of the ODA's original policies was to have a green Olympics, with as much passenger transport not by car as possible, including cycling and walking. There was originally a major plan of new cycle routes and walkways to the Stratford Olympics. Is that still there and will it be retained?

Lord Bassam of Brighton: My Lords, as I understand it, the green transportation plan is very much in place. We are happy with how the transport plan is progressing. My understanding is that in 2012 there will be 10 railway lines, with one train every 15 seconds serving the Olympic Park. That is 240 trains an hour, making Stratford one of the best-connected locations in the world. That gives a flavour of how people will travel to the Olympic Games.

Viscount Montgomery of Alamein: My Lords, the London Underground has an extremely efficient executive, but the biggest constraint on it developing its extensive underground plans is finance. Can the Government do anything to increase the finance coming to the London Underground executive, via Transport for London, to ensure that the plans outlined are executed and, indeed, increased?

Lord Bassam of Brighton: My Lords, I recently answered a Question on that point and indicated clearly that finance is in place and that there is an agreed programme. Great progress is being made by Tube lines and Metronet, which has now been taken into Transport for London, towards completing the refurbishment programme for all Tube lines and railway stations.

Baroness Thomas of Walliswood: My Lords, perhaps the Minister has not been in South Kensington Tube station in recent years. I can tell him that it is chaos on wheels. Platforms are extremely crowded, partly because there are large scaffolding constructions all the way down them, taking up a great deal of room. If we are going to sort it out in time for it to be feasibly used for the Olympics, we have to get cracking much faster than the Minister is suggesting.

Lord Bassam of Brighton: My Lords, I have visited the Tube station in recent years, on my way to one of the museums, which I greatly enjoy. I understand that each year some 30 million people pass through the station, about one-third of them going to the museums. Of course we want Transport for London to carry out upgrades. As I outlined, it has a plan in place to start carrying out refurbishments by the end of next year.

Earl Attlee: My Lords, which London Tube lines are already running over capacity during the morning peak?

Lord Bassam of Brighton: My Lords, the brief I was given addressed the issue on the Order Paper. I apologise for not having infinite wisdom on this matter. Clearly the noble Earl's question fully deserves an answer; he will be provided with one in writing.

Lord Broers: My Lords, will these transport plans be completed in time for full-scale rehearsals to take place. Also, will the scheme of using public volunteers to guide people to transport be utilised? Both those schemes were behind the success of the transport system at the Sydney Olympics.

Lord Bassam of Brighton: My Lords, I am sure that is part of the plan. As I understand it, in its recent assessment, the International Olympic Committee was satisfied that the ODA was well on track not only to securing a good transportation plan, but to putting all the other parts of that scheme in place. Sydney was a good role model both in how the Games worked and how people travelled to watch them.

Lord Forsyth of Drumlean: My Lords, perhaps I misheard, but I think the Minister indicated that there would be a train every 15 seconds. Could he explain how people will be able to get on and off in that time?

Lord Bassam of Brighton: My Lords, I suppose the short answer is "quickly". Perhaps if the noble Lord had listened a little more closely he would have heard me also say that this involved 10 different railway lines.

Afghanistan: Helicopters

Lord Astor of Hever: asked Her Majesty's Government:
	Whether they will provide additional helicopters for Afghanistan.

Baroness Taylor of Bolton: My Lords, I am sure that the whole House will join me in offering sincere condolences to the families and friends of Warrant Officer Dan Shirley and Lance-Corporal James Johnson, who were killed on operations in Afghanistan this past weekend.
	In March 2007, the Prime Minister and the Secretary of State for Defence announced that we would be investing in additional support helicopters, purchasing six Merlins from Denmark and modifying eight Chinook HC3 helicopters to a support role. This work continues to progress as planned. On 20 May this year, a Written Statement was made to update the House on helicopters on operations.

Lord Astor of Hever: My Lords, on these Benches we also send our condolences to the families and friends of the two soldiers whom the noble Baroness mentioned. On a happier note, I am sure that I speak for the whole House when I wish her a very happy birthday.
	A large majority of the recent deaths in Afghanistan have been from roadside bombs. The families of these casualties are entitled to ask whether lives are being lost because of a chronic shortage of helicopters, leading to the use of high-risk vehicles on the ground. Does the Minister not recognise that the Government's decision in 2004 to cut the helicopter budget by £1.4 billion was absolutely inexcusable? These young men and women who engage on our behalf in a vicious war in Afghanistan deserve maximum support. What are the Government's plans to provide them urgently with more airframes, more pilots and more local ground support?

Baroness Taylor of Bolton: My Lords, I thank the noble Lord for his first comment. He is right that there have been a significant number of deaths recently. That is regretted by the whole House. He is not right to suggest that there is a link between the ground vehicles that we have and the helicopters, in terms of who will be transporting people in these circumstances. We have to have a range of transport available and commanders on the ground have to judge, in difficult circumstances, what is the most appropriate vehicle and whether it is appropriate for people to be moved in helicopters. Helicopters cannot be used for all types of movement. They would not be the appropriate means of transport for people engaged in patrols or dealing with local communities. Such decisions have to be taken on the ground. We are supplying more helicopter flying hours than ever before; there has been a 30 per cent increase in them since March 2007.

Lord Lee of Trafford: My Lords, these Benches wish to be associated with the earlier tribute. Why has it taken the Government so long to recognise the vital need to increase the size of the Army and the importance of helicopters, perhaps at the expense of expenditure on heavy armour and artillery?

Baroness Taylor of Bolton: My Lords, it is clear that we need to strike a balance and to spend on a variety of fronts. We have put a lot of money into personal and vehicle protection, and, as I have just mentioned, we have increased helicopter flying hours in Afghanistan by over 33 per cent. We are investing £6 billion in helicopters over the next 10 years, which is £1 billion more than was anticipated when we last looked at the figures in 2006. The problem we have is making sure that we develop across the board, with the best technology available, to provide our troops on the ground with the protection and the vehicles they require.

Viscount Brookeborough: My Lords, the Minister addressed support helicopters in her Answer. However, those helicopters are not generally used for lifting patrols, nor are they ideal. What increase is envisaged in helicopters of the size needed for patrolling and therefore the size needed to reduce the number of operations by soldiers in Snatch vehicles?

Baroness Taylor of Bolton: My Lords, as I said, it is not always a simple choice of whether to put people in a helicopter or a Snatch vehicle. The vehicles used are decided by the commanders on the ground in view of the nature of the operation. If we are winning the hearts and minds of people in Afghanistan, as well as conducting a military operation, we cannot always use heavily armoured vehicles as that could be counterproductive. We are confident that we can increase helicopter flying hours further, and we have taken good measures to make sure that we are improving support. It is by improving support and ensuring that we have the trained crews that we have been able to increase the flying hours.

Lord Soley: My Lords, does my noble friend recall that, when the IRA started using roadside bombs in Northern Ireland, we who were then in opposition did not call for the use of helicopters—although it was suggested in some quarters—precisely because we knew that it was a battle for hearts and minds. That is why it is so important that operational commanders can decide the nature of transport vehicles, and why we put such an enormous burden on our troops in the field who must make the decision of whether to use helicopters, thin-skinned vehicles or heavily armoured ones. We are engaged in a battle with people trying to outmanoeuvre us. Will the Minister kindly remind the House that we must win that battle throughout?

Baroness Taylor of Bolton: My Lords, my noble friend is quite right to point out that our Armed Forces must operate on the ground to build constructive relationships with the local population. We must leave it to commanders on the ground to decide what is appropriate in different circumstances.

Housing and Regeneration Bill

Baroness Andrews: My Lords, I beg to move the Motion standing in my name on the Order Paper.
	Moved, That the amendments for the Report stage be marshalled and considered in the following order:
	Clause 1 Schedule 1 Clauses 2 to 9Schedule 2Clauses 10 and 11Schedule 3Clause 12Schedule 4Clauses 13 to 52Schedule 5Clause 53Schedules 6 and 7Clauses 54 to 58Schedule 8Clauses 59 to 275Schedule 9Clauses 276 to 283Schedule 10Clauses 284 to 297Schedule 11Clauses 298 to 301Schedule 12Clauses 302 and 303Schedule 13Clauses 304 to 309 Schedule 14Clauses 310 to 312Schedule 15Clauses 313 to 319Schedule 16Clauses 320 to 324.—(Baroness Andrews.)

On Question, Motion agreed to.

National Insurance Contributions Bill

Report received.
	Clause 1 [Amount to be specified as upper earnings limit: Great Britain]:

Baroness Noakes: moved Amendment No. 1:
	Clause 1, page 1, line 4, leave out from "(1)," to ", and" and insert "for the words from "those limits" in the second place where they appear to the end substitute "the upper earnings limit from 2010—2011, shall be made in accordance with section 5A below""

Baroness Noakes: My Lords, I shall speak also to Amendments Nos. 2 to 4. The first two amendments deal with Great Britain and the second two are identical in substance for Northern Ireland.
	The Government introduced the Bill under the guise of simplification of the tax and national insurance thresholds. The document issued on the day of the last Queen's speech said that the Bill,
	"would ensure that the Government begins to implement its commitment to provide a solid and simpler state foundation while delivering the Budget 07 personal tax reforms".
	In fact, the Bill gives the Government an unlimited power to increase the income on which ordinary national insurance contributions are payable with only the minimal constraint of an affirmative resolution. My amendments are designed to ensure that the Bill sticks to its original stated purpose: the simplification of the thresholds.
	Under the Social Security Contributions and Benefits Act 1992, the Government can set the upper earnings threshold—the point at which employees stop paying ordinary national insurance contributions—at an amount between six and a half and seven and a half times the primary threshold, which is the point at which ordinary national insurance contributions begin.
	The Government's policy, as set out by the Prime Minister in his last Budget as Chancellor in April 2007, is to continue to align the primary threshold with the personal allowance for tax purposes and to align the upper earnings limit with the point at which higher rate tax is paid. This would create a neat symmetry between income tax and national insurance and should be easier for tax and national insurance payers to understand. We do not object to the policy, even though it means that the Government are able to hike the upper earnings limit way above inflation and, in so doing, raise a large amount—around £1.5 billion a year—from middle-income earners.
	Noble Lords will recall that the April 2007 Budget had a package of changes to income tax and national insurance tax, including the abolition of the 10p rate of tax. The further changes, which the Chancellor announced in late April in the face of the Crewe by-election defeat and a Back-Bench revolt in another place, mess about with the convergence of the income tax and national insurance thresholds. The personal allowance is now £600 above the primary threshold, so that national insurance contributions are paid on that amount even through no income tax is paid. The higher-rate threshold has been moved down by £600, although that means that the higher-rate threshold is now closer to the upper earnings limit.
	The Chancellor has said that these changes to the income tax thresholds are for this year only. We on these Benches simply do not understand how that can happen, since more than 13 million families would be affected, mostly adversely, by the reversal of this year's changes. However, we are told to wait for this year's Pre-Budget Report to find out how the Government will achieve this.
	The Government have been even less clear about what that means for harmonisation with national insurance thresholds, but they have restated their commitment to harmonisation. The amendments allow the Government to achieve harmonisation next year at whatever levels the Chancellor sets in the PBR. That is what they said that they wanted when the Bill was introduced.
	The Government said that they needed the Bill to remove the limit on the upper earnings limit by reference to a multiple of the primary threshold, so that they could achieve the harmonisation of the upper earnings limit with the higher rate threshold for tax purposes. Recent history shows that in the face of political difficulties the Government will abandon harmonisation whenever it suits them. There is a legitimate question about whether the Government have the will to achieve harmonisation. The amendments give the Government the benefit of the doubt; but in so doing we do not believe that it is appropriate or reasonable for a constraint at the top end of the national insurance thresholds to be removed for all time, subject only to the affirmative resolution procedure.
	That leaves workers open to the ultimate stealth tax of national insurance contributions being raised at 11 per cent on all earned income. I remind the House that this is not fanciful; it was mainstream Labour Party policy until the mid-1990s. Let me put it in context. The noble Baroness, Lady Hollis, received a Written Answer on 21 May to a Question about the revenues that would be generated by the removal of the upper earnings limit. The Answer can be found at col. WA204of Hansard of that day. Noble Lords might like to take a deep breath before hearing that the Bill would allow the Government to raise £8.5 billion in extra class 1 national insurance contributions. That is the equivalent of nearly 3p on the basic rate of tax, or raising all the personal allowances and the basic rate limit by about 15 per cent.
	My amendments do not stop the Government dispensing with the 6.5 to 7.5 times formula for next year. They can complete the convergence that they have planned. But from 2010-11, we have taken the Government at their word in wanting to harmonise the thresholds and then keep them in step. The amendments would mean that the upper earnings limit after 2009-10 would keep pace with the higher rate threshold for tax purposes. That threshold is uprated each year by RPI, by what is known as the Rooker-Wise process, named after an amendment moved successfully by the noble Lord, Lord Rooker, when he was in another place. An uprating order in conformity with Amendment No. 2 would do exactly the same thing for the upper earnings limit.
	If the Government wanted to raise the amount by even more than RPI, which they may want to do from time to time, for example, because they want to raise the overall limits and thresholds in income tax and wish to harmonise at a higher level, they would have to bring forward a one-clause or two-clause Bill prior to the start of the tax year. As I explained in Committee, there would be plenty of time for that after the Pre-Budget Report, which each autumn announces all the rates and thresholds for the following tax year. However, such a procedure would clearly be the exception rather than the rule, since the higher rate threshold would generally follow the Rooker-Wise uprating path.
	I moved a beta version of the amendments in Grand Committee. The Minister pointed out that it would be over-egging the pudding to have had a largely automatic uprating process as well as the affirmative procedure and, as I promised him in Grand Committee, I have removed the latter. The Minister also helpfully pointed out that my Committee amendment would have meant rather too many one-clause Bills because of the mismatch between the weekly basis of national insurance contributions and annual tax allowances. So I have added a step three to the calculation, which is set out in Amendment No. 2.
	I have modelled the impact of varying rates of inflation and varying levels of income tax thresholds. If the Treasury wants to set the upper earnings limit at one-52nd of the higher rate threshold, rounded to the nearest pound, the amount that is produced by steps one and two of my amendment would need to be altered at most by an extra £2 up or down. Two pounds will in fact be the exception as there would generally be an adjustment of nothing or plus or minus £1. I also tested out the position if the Treasury wanted to round the one-52nd calculation up by one to the nearest £1, which is perhaps a more natural stance for the Treasury. That produces no requirement to reduce the amount arrived at in step 2 at all and at most a £2 upward increase would be required. Hence step 3 of Amendment No. 2 gives the Secretary of State power to alter the amount arrived at in step 1—which is RPI indexation rounded up to the nearest pound—by up to £2 for the purposes of harmonisation. I believe that this gives the Government all the powers they need to avoid unnecessary legislation while allowing them to fulfil their aims of simplification.
	Most importantly, my amendment would protect National Insurance payers from a Government running short of budgetary options and being tempted by the opportunity that this Bill would otherwise present. I beg to move.

Lord Newby: My Lords, these amendments do not in any way undermine the aims of the Bill for next year and succeeding years in its current form. What the amendments seek to address is an important principle, which is that you should not be able to make a significant change to tax or national insurance without primary legislation. As the noble Baroness has said, if this Bill goes through unamended, it will be possible for the Government to make a tax raid of £8.5 billion without requiring primary legislation to implement it. That seems to us to be an unacceptable basis on which to proceed.
	The Government argue that we are being too squeamish and that parliamentary scrutiny is adequate—or would be adequate even in those circumstances—because the Government would have to introduce an affirmative resolution statutory instrument to implement the change. Our contention is that a statutory instrument does not give adequate parliamentary scrutiny for a change of this nature. Those who have participated in statutory instrument debates know that they are of a different type from normal debates on the Floor of the House except in very rare circumstances. The possibility of amending a statutory instrument is nil. The possibility of overturning a statutory instrument is extremely small. Incidentally, if one should attempt to do so, the Government always make the case that it is a constitutional outrage that one should try to do it. Frankly, therefore, we do not believe that the argument that the statutory instrument is a sufficient safeguard in terms of Parliament's rights and powers is adequate.
	If one takes that view, how can one constrain the Government? The noble Baroness has come forward with a relatively straightforward approach. In some respects it mirrors the Rooker-Wise amendments and we are extremely sorry that we do not have the benefit of the advice of the noble Lord, Lord Rooker, this afternoon as to whether he thinks this would be an appropriate addition to the Rooker-Wise principle. However, it is a straightforward way of proceeding. Why would the Government object to it?
	The principal arguments advanced by the Government are essentially practical. No doubt they have technical issues about the drafting of the amendment, but the practical argument they advance, which has some substance, is that, because national insurance is collected on a weekly rather than an annual basis, and because for that purpose you have to legislate for changes in national insurance before rather than during the year in which the changes come into effect, you run into huge problems because you will not have time to legislate for changes in cases where the threshold is going up by more than the rate of inflation before the end of February, when the national insurance changes have to come in.
	This is not an insuperable problem: there are at least two ways round it. First, the Chancellor could announce changes for the following year's Budget, as he did last year. Noble Lords will remember that he did that with the abolition of the 10p rate—he just did it a year early. You could announce that in a Budget in, say, March and the legislation for national insurance for the following tax year could be introduced in, or around the same time as, the Finance Bill for the first year. The second option, as currently happens anyway, would be simply to announce it at the time of the Pre-Budget Report, leaving aside the problem of ridiculously late Queen's Speeches. If we had the Pre-Budget Report after the Queen's Speech, a Bill could be introduced, presumably in another place in November, and it could be carried over from one Session to another. It could be argued that taking a Bill through its normal stages in both Houses takes quite a long time. However, given that the kind of Bill that we are talking about would be relatively rare, that it would have probably no more than one or two clauses and that the likelihood of your Lordships' House seeking significantly to change the threshold rate for what is in effect a tax is small, it would be perfectly possible to concertina parliamentary scrutiny of such a Bill into three months—November, December and January—without too much difficulty. I do not believe that this is an insuperable problem.
	When we discussed this in Committee, the Minister said:
	"Programming Bills into the system is often not that easy, particularly with the competing priorities that always confront Governments".
	It is not necessarily easy but nobody said that life was easy. This would probably be a relatively infrequent occurrence, and I am sure that the Chancellor would be able to persuade the Legislative Programme Committee to include such a Bill. The Minister raised a second objection about parliamentary scrutiny. He said that this,
	"would amount to a huge increase in parliamentary oversight".—[Official Report, 9/6/08; col. GC 117.]
	That is a good basis on which to proceed. We are therefore happy to support the amendments.

Lord Forsyth of Drumlean: My Lords, I did not have an opportunity to contribute to this debate at an earlier stage but I support my noble friend's amendments. I agree with everything that she said and almost everything that the noble Lord, Lord Newby, said, which is comparatively unusual, wise though he is.
	The Government are in a great fiscal hole and the temptation to use the increase in the national insurance threshold is going to be almost irresistible for the Chancellor. I suppose that this measure borders rather closely to protecting the people against further burdens of taxation. I have no concerns about supporting the amendment for that reason.
	National insurance contributions are one of the great frauds perpetrated on the people of this country. They are called national insurance contributions but they are in fact a tax by any other name, and their impact is as a tax. It is commendable that the Government have gone down the road of simplification. The reduction in the basic rate of income tax to 20p and the abolition of the 10p band was a great step forward in terms of simplification. It all went wrong, of course, because they did not raise the threshold to the level of the 10p band and as a result the Government are in their current difficulties, including those that arise because of the lack of cash. I would be prepared to wager quite a lot that two things will happen between now and the end of the year: first, we will have a new Chancellor of the Exchequer and, secondly, his successor will increase the national insurance threshold in order to get the cash to achieve that purpose. The Government's declared policy, which they abandoned, was to align the rates of national insurance and income tax; that was a good simplification measure in that it made life easier for employers and those responsible for calculating what used to be called stoppages from people's pay.
	It is, however, a bit of a halfway house. The real prize is to integrate national insurance and tax and have a universal taxation system. There are great problems with that because of the impact on pensioners. I can also see that that would present great political difficulties for any Government. However, with the best will in the world, the Government's credentials as committed simplifiers are getting a little worn, not least because the Chancellor's predecessor, the Prime Minister, seemed reluctant to stick to a policy and pursue it with a degree of confidence and predictability which would make life easier for the business community. All the arguments that the Minister made against this at an earlier stage of the Bill, to which my noble friend referred, particularly those about national insurance being paid weekly and so on, are for integration in the long term.
	I support my noble friend. These amendments are an important protection. I cannot for the life of me imagine why any Government would wish to resist them unless there is a hidden agenda to raise the burden of taxation, which, at the moment, would be catastrophic for the many families up and down the land who are already struggling to pay their bills.

Lord McKenzie of Luton: My Lords, I thank the noble Baroness for her amendments and congratulate her on the ingenious formulation of an issue which we discussed in Committee. As I will explain, however, we do not believe it does the trick.
	I shall start by making a few general comments to pick up on some of the points. The noble Lord, Lord Forsyth, talked about the current UK tax burden, but in every year since 1997 and throughout the forecast period of the previous Budget the tax-to-GDP ratio has been well below the peaks reached in the mid-1980s.
	The noble Baroness said that this was represented as being part of a simplification package. Indeed, that is exactly what it is; it was not a tax-raising measure.

Lord Forsyth of Drumlean: My Lords, I am grateful to the Minister. With regard to the point about the tax-to-GDP ratio, can the Minister confirm that, had the tax burden remained the same as it was in 1997, the average family would in real terms be £5,170 better off a year?

Lord McKenzie of Luton: My Lords, you have to look at the distribution of the overall tax take. The poorest families in our country have benefited significantly from the tax and benefits policies of this Government.
	Just to put it clearly on the record, the proposal to align the national insurance rate was part of a simplification package which, as we know, dealt with the 10p rate of income tax. It reduced the basic rate of income tax from 22p to 20p; it increased the upper earnings limit for national insurance by £75 a week above indexation; it raised the aligned higher-rate threshold and upper earnings limit by £800 a year above indexation; it raised personal allowances for pensioners by £1,180; it raised the threshold of the working tax credit by £1,200; and it increased the threshold of working tax credit to make work pay. The net cost of that to the Exchequer was £2.2 billion, before the additional cost that ensued as a result of the increased personal allowance.
	The noble Baroness said that she did not disagree with the policy, and I believe that was echoed by the noble Lord, Lord Forsyth. I welcome those comments, but if you do not disagree with the policy then you achieve it by one of two ways or a combination of them: either you raise the upper earnings limit for national insurance contributions or you reduce the limit of the basic rate of tax. You cannot do it any other way. One way or another, if the noble Baroness supports this policy, I presume that she is saying that she would have done the same sort of thing.
	I shall come on to the issue of stealth taxes in a moment but perhaps I may go back to the specifics of the amendment. As has been explained, its objective is to allow the UEL to be aligned with the higher-rate tax threshold for income tax for the 2009-10 tax year announced in the Budget. Perhaps I can confirm that, as I think that the noble Lord, Lord Forsyth, said that we had abandoned that principle. The Government remain committed in principle to aligning more closely the income tax personal allowance with the national insurance primary threshold and the national insurance contributions system to improve fairness and coherence, reduce administrative burdens and make them easier to understand. We await further announcements from the Chancellor at the PBR, but that remains the policy.
	The amendment goes on to propose the insertion of new Section 5A into the Social Security Contributions and Benefits Act to apply for 2010-11 and subsequent years. The new Section 5A would allow the upper earnings limit to be increased by RPI and rounded up to the nearest pound. The UEL could then be adjusted by an amount not exceeding £2 for the purposes of aligning the annualised upper earnings limit with the sum of the personal allowance and the basic rate limit under Sections 20 and 35 of the Income Tax Act 2007 for the tax year. This would provide a maximum adjustment of £106 in any tax year. I have not done the same calculations as the noble Baroness has on the range in which that threshold works, but I accept what she says.
	I should like, first, to address the main difficulty with the amendment. I think that it was brushed aside by the noble Lord, Lord Newby, but it is real. Under this formula, from 2010-11 the UEL can be raised only by up to an increase related to the RPI and only if the personal allowance and basic rate limit are correspondingly increased by the RPI. A difficulty would arise should the Chancellor decide that it would be appropriate for the personal allowance and/or basic rate limit to be changed by a figure other than the change in the RPI, and other than that automatically allowed under the Rooker-Wise convention—I hesitate to say this in the absence of my noble friend, and I hope that he does not read the record, but I think that that convention should more strictly be called the Rooker-Wise-Lawson convention—and to make the necessary changes through the Finance Bill. If such a decision were taken, the amendment would prevent the Government setting a UEL for NICs, as it would not be possible to achieve the alignment within the tolerance set at step 3 of new Section 5A.
	The second major difficulty with the amendment is one of timing. NICs regulations have to be in place for the start of the tax year because contributions are paid on an earnings-period basis. However, if the tax thresholds were increased by more than the RPI through a Finance Bill, they would have not received Royal Assent until after the NICs UEL regulations were needed. In some circumstances, you might change the whole budgetary process and try to do that a year or two in advance, but as a practical, ongoing basis for dealing with fiscal policy I do not think that that is realistic.
	Even if the first difficulty could be overcome, a further NICs Bill would be needed to deliver the sought-after alignment. As changes to social security legislation require programme Bills, it is unlikely that a slot for a Bill could be found at such short notice or that it would complete its passage through Parliament in time for the regulations to be in place for the start of the following tax year so as to enable employers to make deductions of NICs at the new level.
	In my view, it would not be a sensible use of limited parliamentary time to have a short NICs Bill every time we wanted to change the UEL by less or more than the RPI. As I have explained, the rounding rule in step 3 of proposed new Section 5A could provide insufficient flexibility. I do not believe that it would be a sensible use of limited parliamentary time to have a NICs programme Bill every time we wanted to make that change. If such a restriction had been in existence over the past 20 years, it would have necessitated a further two NICs Bills between 1997 and the 2007 Budget and a further seven NICs Bills in the 10 years preceding 1997 when either the personal allowance or the basic rate limit was increased by either less or more than the RPI.
	I am bound to say to the noble Baroness and her colleagues who accuse us of stealth taxes that those were serial freezes of the basic rate limit and the personal allowance. The basic rate limit was frozen in 1991, 1992-93, 1993-94 and 1994-95. It was overindexed in 1996-97, which coincided with an election, but over that 10-year period adopting this formulation would have required seven programme Bills, so there are practical difficulties to be faced.
	I will touch on some minor technical flaws, which could readily be put right. The first is that the amendment requires the Secretary of State for the DWP to determine the level of adjustment; it would have to be the Treasury. In addition, the Budget resolution that moves the basic rate limit is in Section 10(5) of the Income Tax Act 2007 and not Section 20. Those flaws could be fixed.
	I would also like to return to the rounding formula in step 3. As I mentioned earlier, that allows the UEL to be adjusted by an amount not exceeding £2 for the purposes of aligning the annualised upper earnings limit with the sum of the personal allowance and basic rate limit, meaning an adjustment of £106 at the maximum. As no provision has been made to uprate the £2 amount, it will inevitably lead to a reduction in the flexibility of setting the UEL over time and primary legislation will be needed to amend it. Coupled with proposed new Section 5A, the requirement for affirmative procedures on regulations for setting the upper earnings limit amounts to a huge increase in parliamentary oversight.
	If affirmative resolutions are brushed aside as having no significance, why are we as a Government often pressed to change a negative process into an affirmative one when debating Bills? The scare story is that the Delegated Powers Committee spends a lot of time looking at these things yet we brush it aside, and that this is about the potential to raise £8.5 billion without proper parliamentary scrutiny. The noble Lord, Lord Newby, said that these debates were not routine, except in rare circumstances. If the Government were attempting to raise such money in the way that the noble Lord suggested, do you seriously not think that the House would vote down that proposition? Of course it would. There is protection built in.
	I do not see that that the change proposed in the Bill should give anyone cause for concern in terms of parliamentary scrutiny. The House always considers extremely carefully affirmative resolutions that come before it. The Delegated Powers Committee has expressed no concerns about the powers in the Bill. That committee is diligent in the way that it goes about its work. We are frequently on the receiving end of its recommendations. It made no adverse comment on the powers.
	The Chancellor has said that he will return to the tax and NIC rates and limits for future years in the PBR. The commitment remains to align the UEL with the level at which higher rate tax becomes payable. In the context of the Government's commitment to aligning the UEL with the higher rate tax threshold, the amendments do not work because they could lead to misalignment which would require a further NIC programme Bill. I therefore urge, without any great prospect, the noble Baroness and the noble Lord not to press their amendments.

Baroness Noakes: My Lords, the Minister is right about one thing. I thank the noble Lord, Lord Newby, for his support for the amendments. What he said put a lie to the practical issues that the Minister raised about how difficult it would be to bring forward legislation on a short-term basis. We do not see that as a huge issue. The PBR is not tied to the Queen's Speech. It often comes early, as it did last year. There is plenty of time for a Bill to get through. The Minister said that the Bill had to be programmed, but who programmes Bills? The Government do, and it is easy for them to do so. The Minister said that historically there would have been a requirement for several Bills. Having indexation on the face of the Bill may provide an incentive for Government not to go through the performance of trying to mess around with the levels each and every year. When the Chancellor wants to realign income tax and national insurance, a special Bill would have to be brought forward. If that alignment were reasonable, I am sure that both Houses would co-operate with Government in seeing that through.
	My noble friend Lord Forsyth, whom I thank for his support, pointed out that the real problem with this Bill is the irresistible temptation that it provides the Government to do away with or to increase significantly the upper earnings limit and thereby raise large amounts of what is in fact taxation, but which we have to call income tax. He is quite right to say that it is a form of fraud. This latest increase raises, as I said, £1.5 billion. It will go into the National Insurance Fund, which is already in surplus because national insurance contributions have been raised by an amount greater than needed for the purposes of the fund.
	We do not see the affirmative procedure as providing anything like the protection of primary legislation for those who pay national insurance. The amendments are entirely reasonable because they give no limit to what the Government can do next year. The Government can realign as they want next year. I have been entirely reasonable in giving the Government headway to do the alignment and then to let indexation kick in and protect national insurance payers after that.
	The Minister anticipated that I would not be convinced by his arguments. I wish to test the opinion of the House.

On Question, Whether the said amendment (No. 1) shall be agreed to?
	Their Lordships divided: Contents, 189; Not-Contents, 134.

Resolved in the affirmative, and amendment agreed to accordingly.

Baroness Noakes: moved Amendment No. 2:
	Clause 1, page 1, line 5, at end insert—
	"( ) After section 5 of that Act insert—
	"5A Amount to be specified as upper earnings limit
	(1) This section applies for 2010—11 and subsequent tax years if the retail prices index for the September before the start of a tax year is higher than it was for the previous September.
	(2) The upper earnings limit may be increased to an amount which does not exceed the amount found as follows—
	Step 1
	Increase the upper earnings limit for the previous tax year by the same percentage as the percentage increase in the retail prices index.
	Step 2
	If the result of Step 1 is not a multiple of £1, round it up to the nearest amount which is a multiple of £1.
	Step 3
	Add to or deduct from the result of Step 2 an amount not exceeding £2 determined by the Secretary of State for the purposes of aligning the upper earnings limit on an annual basis with the sum of the personal allowance and the basic rate limit under sections 20 and 35 of the Income Tax Act 2007 (c. 3) for the tax year.""
	On Question, amendment agreed to.
	Clause 2 [Amount to be specified as upper earnings limit: Northern Ireland]:

Baroness Noakes: moved Amendments Nos. 3 and 4:
	Clause 2, page 1, line 17, leave out from "(1)," to ", and" and insert "for the words from "those limits" in the second place where they appear to the end substitute "the upper earnings limit from 2010—2011, shall be made in accordance with section 5A below""
	Clause 2, page 1, line 18, at end insert—
	"( ) After section 5 of that Act insert—
	"5A Amount to be specified as upper earnings limit
	(1) This section applies for 2010—11 and subsequent tax years if the retail prices index for the September before the start of a tax year is higher than it was for the previous September.
	(2) The upper earnings limit may be increased to an amount which does not exceed the amount found as follows—
	Step 1
	Increase the upper earnings limit for the previous tax year by the same percentage as the percentage increase in the retail prices index.
	Step 2
	If the result of Step 1 is not a multiple of £1, round it up to the nearest amount which is a multiple of £1.
	Step 3
	Add to or deduct from the result of Step 2 an amount not exceeding £2 determined by the Secretary of State for the purposes of aligning the upper earnings limit on an annual basis with the sum of the personal allowance and the basic rate limit under sections 20 and 35 of the Income Tax Act 2007 (c. 3) for the tax year.""
	On Question, amendments agreed to.

Pensions Bill

Lord McKenzie of Luton: My Lords, I beg to move that the House do now again resolve itself into Committee on this Bill.

Moved accordingly, and, on Question, Motion agreed to.
	House in Committee accordingly.
	[The CHAIRMAN OF COMMITTEES in the Chair.]
	Clause 55 [Right of employee not to be unfairly dismissed]:

Lord Skelmersdale: moved Amendment No. 109:
	Clause 55, page 27, leave out lines 5 and 6

Lord Skelmersdale: Tomorrow and tomorrow and tomorrow rolls on this happy Bill. We turn now to a rather unhappy situation; that of unfair dismissal. For some reason, government Amendment No. 109A, although it refers to the same clause, has been grouped with this. But I make no complaint: with a bit of luck we can speed up a bit through the rest of the day. Under Clause 55, when an employee is sacked because the employer has leant on him in one direction or another about auto-enrolment, that will be unfair dismissal. That is a summary of the clause as I understand it.
	I have tabled a simple, probing amendment. It would seem that subsections (1)(a) and (b) of proposed new Section 104D of the Employment Rights Act 1996 are in direct contradiction to subsection (2)(a). They appear to say that a requirement that does not apply in favour of an employee could be enforced as if it were. It is quite possible that I have totally misread this clause. If I have, I have no doubt that the Minister will explain how and why. I beg to move.

Lord Tunnicliffe: In responding to the amendment proposed by the noble Lord, Lord Skelmersdale, I shall speak also to government Amendment No. 109A. Clause 55 provides a new day-one employment right for employees not to be unfairly dismissed on grounds related to membership of a qualifying pension scheme. This protection will cover circumstances in which employees are dismissed for claiming entitlements to save in a qualifying workplace pension as a result of the new employer duties introduced under our reform. As with existing unfair dismissal rights, we want that protection to extend to employees who are dismissed for making a claim to such an entitlement, even if it is an incorrect claim, provided that it is made in good faith. That is what proposed new Section 104D(2) of the Employment Rights Act, as inserted by Clause 55, would do.
	The noble Lord's amendment would remove the provision, which would mean that employees would not be able to claim unfair dismissal in relation to the new duties in certain circumstances. For example, an employee earning below the qualifying earnings band, who was dismissed for asking his or her employer automatically to enrol them into a qualifying scheme, would not be able to claim unfair dismissal. I hope that the noble Lord, Lord Skelmersdale, will agree that this effect would not be desirable.
	Government Amendment No. 109A is a drafting amendment that puts right an inconsistency in the wording of proposed new Section 104D of the Employment Rights Act, as inserted by Clause 55(2). The amendment clarifies that it is a Chapter 1 requirement and that its enforcement should be referred to rather than rights. That makes the approach in Clause 55 consistent with the approach in Clause 53. I therefore would ask the noble Lord to withdraw his amendment.

Lord Skelmersdale: The Government are being unduly suspicious. The Minister has just said that if an employee earning less than £5,035 a year asks his employer to auto-enrol him—or, to put it another way, claims his auto-enrolment rights—and, as a result, the employer sacks him, that would be unfair dismissal. I cannot envisage such an event, but I will look again at what the noble Lord has said. Incidentally, as I should have said at the beginning, I have no objection to government Amendment No. 109A, nor, indeed, have I ever had. I will look carefully at what the noble Lord said and hope that I do not have to return to this matter on Report. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Lord Tunnicliffe: moved Amendment No. 109A:
	Clause 55, page 27, leave out lines 11 and 12 and insert—
	"( ) This section applies to any requirement imposed on the employer by or under any provision of Chapter 1 of Part 1 of the Pensions Act 2008.
	( ) In this section references to enforcing a requirement include references to securing its benefit in any way.""
	On Question, amendment agreed to.
	Clause 55, as amended, agreed to.
	Clause 56 [Restrictions on agreements to limit operation of this Part]:

Baroness Turner of Camden: moved Amendment No. 110:
	Clause 56, page 28, line 41, at end insert ", or
	( ) is a person appointed by The Pensions Advisory Service."

Baroness Turner of Camden: This part of the Bill deals with advice. Clearly, it is necessary that people who are involved in securing their pension entitlement should have access to good advice. Indeed, the clause lists the various types of people who could be approached for advice. I want to add to this list a person appointed by The Pensions Advisory Service because I would like to draw attention to a really rather remarkable advisory service.
	The service was established originally some 20 years ago as a charity. I was involved from its inception until last year, when my term of office came to an end. The intention was to set up a countrywide network of professionally trained people who would be prepared to offer free advice to individuals. It has operated on that basis ever since. These professionally qualified individuals consist in the main of people who have retired from working in the pensions and financial services industry, often on quite good pensions themselves, and want to give something back by utilising their professional qualifications to assist their fellow citizens.
	The service has operated in that way for a long time. It has ceased to be the charitable organisation it once was; for quite some time it received funding via the Occupational Pensions Board and then via OPRA. It now receives financial assistance via the DWP, although we were very keen to ensure that when we came under the aegis of the DWP we nevertheless maintained our independence.
	The Pensions Advisory Service is, as I said, a countrywide set-up of independently qualified people who are willing to give their services free to individuals and do so on a very successful basis. I therefore think it would be a good idea if this suggestion were to be written into the Bill. It may be said that it can be done via regulations, which is perfectly true. However, now that the service comes under the aegis of the DWP and its status is formally recognised, it would be a good idea if this proposal could be written into the Bill. I beg to move.

Lord Skelmersdale: Some of us were glad to be invited to the 25th anniversary party of TPAS last night. I agree that, where a case of employment law goes to the employment tribunals, advice must be given before the complainant goes to such a tribunal. Since we are talking about pensions in this case, that advice should be given by someone with relevant experience. I agree with the noble Baroness, Lady Turner. However, I wonder whether this matter is not covered in subsection (6), which provides that a person is a relevant adviser if they work at an advice centre or, under paragraph (d), if they are,
	"a person of a description specified in an order made by the Secretary of State".
	Either of those could apply, but I agree with the noble Baroness, Lady Turner, that this matter is so vital that it should be expressed in the Bill. I therefore support her.

Lord Oakeshott of Seagrove Bay: I join the noble Baroness, Lady Turner, and the noble Lord, Lord Skelmersdale, in paying tribute to TPAS. Like them, I think that there is no reason why this provision should not be in the Bill and so am happy to support the amendment.

Baroness Hollis of Heigham: I declare an interest as a trustee of TPAS. I hesitated about whether to speak. Although in the context of the Thoresen review this is only one of many areas in which advice may be needed, it seems that identifying TPAS by name may give a signal—it is not a word that I like to use—that TPAS is an appropriate body, agency or resource for other and wider areas of financial information and advice. In that context, it would be helpful if the Minister could give a positive answer.

Lord McKenzie of Luton: I thank my noble friend Lady Turner for tabling the amendment and for providing an opportunity to discuss the clause and the role of TPAS. I thank other noble Lords, too, for their contributions. Before I discuss the amendment, let me acknowledge the valuable role that TPAS plays in providing information and guidance to members of the public on a wide range of pension-related issues. It helps thousands of people each year and is successful in helping to resolve issues that are brought to it. My noble friend has given long and distinguished service in that cause, as my noble friend Lady Hollis is now doing.
	The amendment is to Clause 56, which specifies the conditions regulating compromise agreements under the Act. Under them, it is possible for employer and worker to agree to limit or exclude the employer duties or individual rights arising from these reforms. This is possible only in very limited circumstances relating to conciliation proceedings. One of the conditions is that an individual must have received advice from a relevant independent adviser on the terms and effect of the proposed agreement and on the ability to pursue their rights before an employment tribunal. The Bill lists at Clause 56(6) the types of person who can act as a relevant independent adviser. This includes qualified lawyers and certified trade union officials. The amendment would list in addition persons appointed by TPAS to act as independent advisers.
	As the noble Lord, Lord Skelmersdale, spotted, it is quite possible that TPAS advisers may already be covered by the existing provision at subsection (6)(c), which includes as a relevant independent adviser somebody who,
	"works at an advice centre (whether as an employee or a volunteer) and has been certified in writing by the centre as competent to give advice and authorised to do so on behalf of the centre".
	However, if, as we suspect, subsection (6)(c) is not sufficient to cover a person appointed by TPAS for this function, it would nevertheless be possible to add them to the list of independent advisers under the order-making power in subsection (6)(d), which authorises the Secretary of State to allow a person of a description specified to act as an independent adviser.
	In considering whether persons appointed by TPAS should fulfil this role, we would need to assess whether they had sufficient knowledge and experience of employment law in addition to their pensions expertise. We will have to discuss that in detail with TPAS. We are planning to commission an independent review of TPAS this summer, which will consider how TPAS's role might change as a consequence of the 2012 pension reforms. The results of that review should prove helpful in the context of whether to use the order-making power in this clause. Therefore, while I appreciate the thrust of my noble friend's intentions, I believe that the amendment is unnecessary. TPAS-appointed advisers may already be able to act as independent advisers for the purpose of Clause 56, under subsection (6)(c) or, more likely, added to the list under the order-making power in subsection (6)(d). Whether it might be more appropriate for the order-making power in subsection (6)(d) to be used in this way would be best considered once this high-level review of TPAS's role in the reforms is concluded.
	To return to my opening remarks, TPAS advisers already play a vital role and it is likely that that role will become even more important in future. We recognise and value their expertise in the field of pensions advice and look forward to exploring with them how their role will develop to fit the landscape that we are creating in these reforms. I acknowledge that that does not amount to accepting the amendment in the Bill, but I hope that the tenor of my remarks indicates how highly we value TPAS, which we feel should have a role in that connection in future. I urge my noble friend to withdraw the amendment on the basis of those comments.

Baroness Turner of Camden: I thank my noble friend for those comments and the noble Lords, Lord Skelmersdale and Lord Oakeshott, for their support. Obviously the work of TPAS is known to those who are interested in pensions provisions. I am glad that it is acknowledged that that work has been valuable and that it will continue to be valuable. I am glad to learn, too, that this matter is under further consideration, perhaps even with a view to extending the role that TPAS plays. In view of what has been said and the assurances that have been given, I thank everybody who has contributed. TPAS will be glad to learn what has been said this afternoon. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.
	Clause 56 agreed to.
	Clause 57 agreed to.
	Clause 58 [Power to establish a pension scheme]:

Baroness Noakes: moved Amendment No. 110A:
	Clause 58, page 29, line 32, leave out "may" and insert "shall"

Baroness Noakes: We have finally arrived at the personal accounts pension scheme in Chapter 4 of Part 1. Anyone who had half an idea of the new personal accounts scheme—and there are precious few of those—would come to this Bill expecting to find something that said "personal accounts". They would be mystified because they would find nothing. Instead, the rather anodyne provisions of Chapter 4 and Schedule 1 are entitled "Power to establish a pension scheme", as if it were any old pension scheme and not one that is destined to be the recipient of billions of pounds of pensions contributions each year. However, we shall not let the apparent blandness of the Bill deter us from probing the way in which the new personal accounts pension scheme will work.
	Amendment No. 110A concerns subsection (1) of Clause 58. Under that subsection, the Secretary of State "may" establish a personal accounts pension scheme. My amendment replaces this permission with the requirement "shall". We often debate may/shall amendments, but this is not a mere debating point. I believe that it goes to the heart of the Government's intentions about automatic enrolment.
	Under Clause 3, employers "must" make arrangements whereby relevant jobholders become active members of an automatic enrolment scheme. Many employers do not have pension schemes at all, especially if one disregards stakeholder arrangements, many of which were never used. However, this auto-enrolment is the primary focus of the Bill. Most employers have schemes that do not currently provide for automatic enrolment and do not comply with the qualifying earnings test; we have already discussed those issues in Committee.
	If employers do not make changes to their existing schemes, they will need access to the default personal accounts scheme. Therefore, it is something of a surprise to find that the Secretary of State has the option of whether or not to set up a pension scheme under Clause 58. If he does not do so, the Bill's aims will be thwarted. More important, the employer duties in the rest of this part of the Bill will be in a dangerous form of limbo. Employers might have to comply with something that is impossible because no personal account pension scheme has been set up. I cannot believe that the drafting of this Bill, as it stands, is reasonable. It does not live out the clear policy intentions laid out by the Government in their various White Papers. I beg to move.

Lord Oakeshott of Seagrove Bay: This clause is at the heart of the Bill. The Government have stated that they have an absolutely firm and clear intention of bringing in auto-enrolment and this scheme. I agree with the noble Baroness, Lady Noakes: I cannot see why the Bill should not say "shall".

Lord McKenzie of Luton: I thank the noble Baroness for the amendment. I hope to satisfy both noble Lords as to why the Bill is drafted as it is. As the noble Baroness has said, we have now reached Chapter 4 of the Bill, which sets out the legislative framework for establishing personal accounts, one of the cornerstones of the reform package proposed by the noble Lord, Lord Turner.
	The Pensions Commission proposes the establishment of a low-cost simple pension scheme for low to moderate earners who are currently without access to a pension. Last year's Pensions Act established the delivery authority that is to be charged with building this scheme. This year's Bill provides the legal basis on which the scheme will be built. The scheme will be set up as a trust-based occupational scheme. It will be run by a sole corporate trustee, constituted as an NDPB. This provides accountability both to the Secretary of State and to Parliament. The Bill sets out the framework; the detail of the scheme will be set out in the scheme order, which will be secondary legislation. Further detail will be set out in the non-statutory scheme rules. We intend to consult on the draft order and the rules on the scheme, which will give all interested stakeholders the opportunity to comment well before the scheme is up and running.
	Clause 58 gives the Secretary of State the power to establish a pension scheme, ensuring in particular that the scheme is treated as established under a trust. The amendment in the name of the noble Baroness would impose a duty on the Secretary of State to set up the scheme, rather than provide a power to do so. I sympathise with the need for clarity around the Government's intentions to establish this scheme. Let me be absolutely clear, as was my honourable friend Mike O'Brien in the other place. We will use this power to create the personal accounts scheme and it will be a defined contribution occupational pension scheme.
	However, the wording of this clause reflects the view of those drafting the legislation on how best to construct a power that provides for our desired approach of creating the scheme by developing a scheme order that is analogous to a trust deed. The details of the scheme will be set out in the scheme order. It may be either desirable or necessary, sometime in the future, for the Government to amend the scheme order. In accordance with the apparently tried and tested provisions of the Interpretation Act 1978, we will be able to use the power in Clause 58(1), as currently drafted, to do so.
	By converting that to a duty, the amendment would—in drafting terms—remove that opportunity, unless we drafted a further power. It would mean that this clause no longer allowed for an amending order, should that need arise. I draw noble Lords' attention to the fact that if an amending order were to proceed, it would be subject to Clause 32 of the Bill and would require the consent of the trustees. A duty would not, apparently, work in the same way as a power. There cannot be a duty that would require the Secretary of State to amend the order, whether that was needed or not.
	I hope that that rather technical drafting point will allay noble Lords' concerns. I also hope that the noble Baroness will accept my reassurances that we will use this power to establish the scheme and that the permissive drafting is there to allow for future changes only. On that basis, I hope that she will feel able to withdraw the amendment.

Lord Oakeshott of Seagrove Bay: The Minister keeps saying "we will". We, on these Benches, would be very happy if he moved an amendment to say "will" instead of "shall", but the rest of his argument is gobbledegook.

Lord McKenzie of Luton: It might have been gobbledegook to the noble Lord. The point that I am trying to make is that, if we have a power for the Secretary of State, that power not only enables the Secretary of State to set up the scheme under the order as proposed at the start of proceedings, but can be used subsequently to bring forward the further order, subject to the safeguards in the Bill. We received legal advice that we could not do that in the same way if the power were a duty. That is the reason. I cannot believe that noble Lords would think that we had any intent other than to proceed as we have made absolutely clear. We have a lot of political capital invested in this, apart from the aspirations of millions of people who deserve an entitlement to a decent pension.

Baroness Noakes: I thank the noble Lord, Lord Oakeshott, for his support. I agree that what the Minister said is gobbledegook. I am a plain sort of person; I believe that Bills should say what the Government mean them to say. If the Government say that they are going to set up a pension scheme in order to deliver personal accounts, the Bill should say that they will—whether it is "shall" or "will". The Government's argument is that they want to use the power to do two kinds of things: to set the scheme up and later to amend it. That may well be the case, but we should be clear in the Bill that the Government must set up this pension scheme, otherwise the employer duty in Clause 3 is either meaningless or impossible to comply with, which would be unacceptable. The Government could make a further amendment for powers if they wanted to.

Lord McKenzie of Luton: If personal accounts were not to proceed—and that will simply not be the case, as they will proceed—that would preclude the employer duty from proceeding. It is right to say that this would be very difficult without personal accounts. We should not be apart on this. It is abundantly clear that we are going to set up this scheme. I have explained that we have the power rather than a duty because of the ability to make changes subsequently. I really do not see why this is giving rise to such concern.

Baroness Noakes: The problem is that the Minister has just said that the Government could implement Clause 3, which is the employer duty, without having put in place a pension scheme for personal accounts. The Minister is trying to say that he needs the power to do two things: first, to set the scheme up and, secondly, to amend it. It seems to me that the Minister needs two kinds of formulation in the Bill, not one. For that reason, I would like to test the opinion of the Committee.

On Question, Whether the said amendment (No. 110A) shall be agreed to?
	Their Lordships divided: Contents, 136; Not-Contents, 133.

Resolved in the affirmative, and amendment agreed to accordingly.

Baroness Noakes: moved Amendment No. 110B:
	Clause 58, page 29, line 33, at end insert—
	"(1A) A scheme must be established and capable of operation not later than 1st April 2012.
	(1B) If the Secretary of State believes that he will be unable to comply with subsection (1A) he must lay a report before Parliament setting out—
	(a) the reasons for the delay,(b) the date on which he expects the scheme to be established and capable of operation, and(c) what arrangements he intends to make to promote pensions saving prior to that date."

Baroness Noakes: The Minister will be relieved to know that, for today, this is a probing amendment. The amendment would insert two new subsections into Clause 58, and it is designed to tease out the timing of the introduction of personal accounts.
	An amendment addressing timing was tabled by my honourable friends in another place following a less than confident interview given by the chief executive of the Personal Accounts Delivery Authority—PADA—in which he said about the achievability of 2012:
	"The honest answer is that I don't know".
	Doubtless, the DWP has by now told him that honesty is not what he is paid for. That interview was around six months ago. It appears from statements made on the Bill in another place by the Minister's right honourable friend Mr O'Brien that, since then, the chief executive, Mr Tim Jones, has prepared a report on implementation. Mr O'Brien said:
	"He now has a credible set of plans that are consistent with starting to deliver the scheme from 2012".—[Official Report, Commons, 22/4/08; col. 1205.]
	At that stage the Minister refused to release Mr Jones's report, although about a month later 10 pages of double-spaced waffle were placed in the House of Commons Library. I do not know whether that was meant to reassure Parliament but it gave little meaningful information and no reassurance whatsoever.
	The Minister in another place was particularly interesting on what 2012 actually meant. Most people had assumed that 2012 meant April 2012, which is the date I have included in my amendment, because to implement the scheme other than at the same time as the tax and national insurance years begin would be pretty difficult, not to mention chaotic. The transitional costs on employers would jump up from the £350 million that the DWP has estimated for implementation because it would be extremely difficult to do it at any other point during the year.
	According to Mr O'Brien on Report for the Bill in another place,
	"the plan is to start to deliver in the course of 2012. The scheme will not suddenly appear on one day in 2012 and all be in one place".—[Official Report, Commons, 22/4/08; col. 1207.]
	The report from PADA deposited in May is similarly vague in referring to a "launch in 2012". These are weasel words. They can easily encompass getting the scheme into its preparatory stages—issuing documentation and the like—but not being open for business in the sense of being able to accept contributions. That is what we mean by a scheme being in operation. I hope today the Minister will be much more specific about the start date and I have a number of specific questions for him. When will the first contributions be accepted? Is there any possibility of a start date other than the beginning of a tax year? Is there a precise project plan with timelines which lead to full implementation in 2012 and, if not, what will be delivered and when? I should say that the pretty little diagram on page 8 of the PADA document is not what I am talking about. Are robust project management arrangements in place? Has the Office for Government Commerce vetted the plans and, if so, what has it found? Is there a risk register for the project and, if so, will that be made available to Parliament? Why is it not possible to share the detailed planning arrangements with Parliament? I hope the Minister is not going to get out his usual fig leaf of commercial confidentiality to hide behind.
	I could go on with my questions but the Minister knows what is needed to inform those outside his department who need to know what will be delivered by PADA. He does not need to hide behind formulae devised by his officials—he just needs to tell us how it is.
	My amendment first requires that the scheme is capable of operation by 1 April 2012. I accept that "capable of operation" can have a multitude of meanings but the Minister knows what I mean by this and it is not a mere launch. The second subsection says that, if the Secretary of State thinks that he will be unable to comply with that date, he should lay a report before Parliament setting out the reasons for the delay and the date that he expects the scheme to be established and operating. It is important that employers and others have some certainty about what timescales they are intended to be operational within. The proposed new subsection also requires the Secretary of State to say what he intends to do to promote pension savings prior to the introduction of personal accounts. This is important because for every year that pension savings are deferred, especially for younger workers, there is a big impact on the amount realised at the end of the period or going into decumulation. There are options open to the Secretary of State to explore here.
	The introduction of personal accounts is a major project carrying significant implementation risks which need to be managed. We have considerable doubts about the Government's ability to deliver major projects, and that applies to the Government's quangos as much as to the Government themselves.
	We regret the lack of openness and transparency about the development of personal accounts to date; indeed, we regret the lack of a wholehearted commitment so far to a substantive delivery date in 2012. This is the Minister's opportunity to reverse the policy of "Tell them as little as possible" and to replace it with a policy based on honesty and openness. I beg to move.

Lord Oakeshott of Seagrove Bay: I am sympathetic to proposed new subsection (1B), which says that if there is to be a delay, the Secretary of State should effectively come forward, come clean and explain what is happening. However, I am a little concerned about proposed new subsection (1A), although I may have misread it. There are slight echoes of the amendment on which we have just voted. If we say that a scheme,
	"must be established and capable of operation not later than 1st April 2012",
	which we all want, what happens if, for understandable reasons, we miss that date? Are we then in the position, if we agree to the amendment, that the whole thing falls away? Perhaps I misunderstand it but that is my worry. I support proposed new subsection (1B) but I am concerned about proposed new subsection (1A) because if there is a delay we do not want to lose the whole scheme.

Lord McKenzie of Luton: Before I deal with the amendment, I say to the noble Baroness that comments like, "Honesty is not what he is paid for" ill becomes her and our debates in this Chamber, particularly when someone is referred to who is not here and who is not able to respond. Also, challenging the Government's honesty in this is entirely unfair.
	This amendment would place in the Bill a deadline for implementation of 1 April 2012 for what could be the largest occupational pension scheme in the UK. After Tim Jones was appointed, he took the sensible approach of carrying out a review of the plans that he inherited to satisfy himself that they were deliverable. The review was completed at the end of March and Tim Jones has made it clear that he has a credible set of plans that are consistent with delivery of the scheme from 2012. Following the review, a copy of A Report on the Personal Accounts Delivery Authority's Plan for Delivery was placed in the Library of the House. Notwithstanding the noble Baroness's comments, that was an attempt to take stock of where we are and the timeframe for delivery.
	Our intention has always been to introduce the reforms from 2012 and that is still the case. However, we are still four years away from the go-live date of a complex programme delivering groundbreaking reforms. So clearly we cannot say that there are no uncertainties, risks or events around the corner that may change how we see things. A fixed implementation date, particularly one that is so precise—to the day—for this scheme would allow no flexibility should unforeseen events lead us to reassess our approach to implementation. While we firmly believe that there is no reason why we will change our approach, we do not think that a fixed date would be prudent.
	This amendment also places a requirement for a report to be laid before Parliament in the event that the implementation date appears to be unachievable. The requirement does not seem to negate the requirement in the amendment to establish the scheme—the noble Lord, Lord Oakeshott, focused on that point. We do not believe that this is necessary, as progress towards implementation will be subject to scrutiny on an ongoing basis and there will be numerous opportunities for stakeholders, including Parliament, to input and review progress. For example, the delivery authority will produce an annual report and accounts setting out its progress over the past year. This will be laid in the Library of the House. In addition, it will produce a business plan, setting out its objectives and priorities for the forthcoming year. Both of these documents will be available on the authority's website and therefore open to scrutiny by everyone. As part of continued stakeholder engagement, we aim to set out our plans for the employer duty in the autumn before going on to publish draft regulations in the spring of 2009. We will also consult on a draft scheme order and rules in the spring of 2009.
	I was going to say that I would hope that the noble Baroness is reassured by that response, but from what has happened to date, I doubt whether she is. I say to both the noble Baroness and the noble Lord, Lord Oakeshott, that Tim Jones and Paul Myners have invited opposition Members to discuss the details of their plans. I do not know whether noble Lords have taken that opportunity yet, but I would certainly urge them to do so. Indeed, Paul Myners turned up at a meeting of noble Lords but I think that only the noble Lord, Lord Skelmersdale, was there. It is not helpful to place fine details of the project on the record at this time when procurement has not yet commenced. We must appreciate that there are commercial sensitivities around this.
	The noble Baroness asked some specific questions about whether we have committed to 1 April as a start date. The answer to that is, no, we have not. As Mike O'Brien said in another place, that may well be the right date to start, but the commitment is in 2012. In any event, from provisions that we have previously discussed, we would see a phased introduction of the auto-enrolment duty which would potentially impact on personal accounts as well. It may well be the right date; it may be the date that it does happen; but we have not committed to it in any way. The noble Baroness asked whether there are project plans. I am sure there are project plans. There will be business plans and the framework agreement between PADA and the DWP will require targets, a plan to be set down and an annual report.
	This is a major project to change fundamentally the pensions landscape. The enabling savings retirement programme covers the implementation of personal accounts, the introduction of automatic enrolment, the mandatory employer contribution and the communications to support these reforms. Tim Jones's report sets outs the key stats which PADA needs to undertake before the reforms can be introduced. The first step is going through government approval processes before the procurement process can begin. Part of that is the passing of this legislation. Before these approvals can be obtained the funding strategy needs to be developed. The secondary legislation also needs to be developed and passed. We intend to consult on a draft order, as I said earlier, in the spring of 2009. Subject to approvals, PADA is intending to issue an OJEU advertisement in January 2009 for the main procurement exercise. Estimates that the time suppliers will need to put in place the necessary capabilities to deliver such a scheme are subject to negotiation during the procurement exercise. The suppliers will then need to design, build and test systems before they can be implemented.
	These are major reforms and it is important that we get them right. However, as we have said repeatedly, it is our intention to introduce the reforms from 2012 and this is still the case. I understand the desire of noble Lords to have as much detailed information as possible but they must understand precisely where we are on this exercise. I would urge them to talk to Paul Myners and Tim Jones and get this directly from those who have the responsibility.

Baroness Noakes: I was looking for information and commitment from the Government. Their agent is PADA; if it does not do the job properly then they can sack the people who work there. It is not for opposition Members to inquire of the staff of quangos—that really is not how life is supposed to work. The Minister said that he thought that there were detailed project plans, which I found extremely unspecific. I asked whether there were detailed project plans and I did not get a specific answer. I was hoping to follow up my query by asking to see them. Is there any reason why detailed project plans cannot be made available to Parliament?

Lord McKenzie of Luton: An outline of the approach is set down in the Library and the noble Baroness has referred to that. The noble Baroness may not want to talk to these individuals directly, but that is her choice. PADA is an NDPB. It will have a framework agreement which needs to be revised once the new powers of PADA come into being after the Bill is passed. That will require a business plan, annual reporting and a report on PADA's progress under the responsibilities imposed on it. That will be in the public domain and will be available on an annual basis. All that is quite normal; it is how these processes work. The noble Baroness keeps asking to go along and look at the books and at every plan that is being developed, but I am not sure that that is necessarily the role of politicians, the Government or the Opposition. Again, I urge the noble Baroness to talk to PADA. I am sure that it will explain in some detail where it has got to.

Lord Oakeshott of Seagrove Bay: I welcome the fact that I have had an invitation to meet Tim Jones and Paul Myners, and I look forward to doing so. I do not think that that is in any way inappropriate; I shall find it helpful and useful.

Baroness Noakes: The Minister has again referred to the little diagram in the document placed in the House of Commons Library—not, I should add, the House of Lords Library—but it is not a project plan. It is a million miles from a project plan but we are invited to believe that it will all be all right in 2012.
	The Minister referred to phased auto-enrolment, but that cannot even begin unless the personal accounts scheme is up and running because there is no sensible way of phasing other than having the whole scheme operational. It seems to me that the Minister is hoping that PADA will deliver. He refers to annual reports and accounts being available to Parliament but those will not say anything about delivery; we know that. All the documents that have been produced so far are so unspecific as to be barely worth the paper that they are written on.
	We will have some time during the Summer Recess to progress this issue and I hope that the Minister will be able to procure some more detailed information. This does not require the breaching of commercial confidentiality but it does require information to be in the public domain. It is not enough for private meetings to take place, because many people are interested in the detailed outworking of this policy. I said at the outset that my amendment was probing. I have probed and found the Government wanting but, for today, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Baroness Noakes: moved Amendment No. 110BA:
	Clause 58, page 30, line 5, at end insert—
	"( ) A scheme established under this section shall not be subject to the requirements to obtain audited accounts and an auditor's statement about contributions under regulations made pursuant to section 41 of the Pensions Act 1995 (c. 26)."

Baroness Noakes: I shall speak also to Amendment No. 110DA. These amendments concern the audit arrangements for the new personal accounts pension scheme. They have been suggested by the Institute of Chartered Accountants in England and Wales, an organisation with which the Minister and I are both familiar.
	The problem that the amendments seek to address is that the legislation relevant to trust-based occupational pension schemes has an audit requirement by virtue of Section 41 of the Pensions Act 1995 which is impractical to operate without amendment for personal accounts. The current audit rules require a pension scheme auditor to state whether in his opinion contributions have been paid in all material respects with the payment schedule. This encompasses both accuracy of payment and timeliness but is very difficult, not to say impossible, to achieve and is certainly costly in terms of audit fees for complex pension schemes with many employers involved, as this will be.
	This is not a new problem; it arose in connection with stakeholder accounts. Eventually, some sort of compromise was reached so that the audit report was replaced by a report by reporting accountants—which, as the Minister will be aware, is not the same thing as an audit—on the trustees' statement in relation to controls. The amendments are designed to get to the same point for personal accounts. Amendment No. 1l0BA removes the need for an auditor's statement about contributions under Section 41 of the 1995 Act. Amendment No. 110DA specifies what will be in its place; namely, a trustee's statement about systems and controls and then a reporting accountant's report on the design and operation of those systems.
	This was debated in another place and the Minister there made some sympathetic noises but these did not go so far as to accept the concerns expressed by the Institute of Chartered Accountants in England and Wales. Hence; we have been asked to table these amendments again in your Lordships' House. In another place the Minister appeared to accept that auditors will find it difficult to give a clean audit opinion on contributions where the contributions are paid by a myriad of employers, many of them very small. But the Minister clearly did not grasp that in seeking what he called "proper accounting" and accounts which are not "unduly qualified"—I do not know what either of those terms means—there is only one realistic option, which is a systems-based approach. We are back to the best being the enemy of the good and to the DWP's granular approach to implementation.
	I hope that the Minister's own background and experience will allow him to see that a conventional audit report as envisaged for single employer schemes simply does not translate into something like the personal accounts scheme. "Audit" is the wrong concept or, alternatively, it is one which is both over-engineered and destined to end in mechanical failure.
	I would not regard it as right to leave this issue to regulations. It took a long time for the accounting profession to sort out the issue in connection with stakeholder pensions and it would not be right for us to let personal accounts go ahead without proper reporting arrangements in place. There is a manifest problem in trying to retrofit the personal accounts concept into the existing law for trust-based schemes. We should recognise that now and on the face of the Bill. I beg to move.

Lord McKenzie of Luton: I thank the noble Baroness for bringing forward the amendments, which relate to the auditing requirements on the scheme. As the noble Baroness said, the Institute of Chartered Accountants in England and Wales—a fine body, if I may say so—raised the issue with officials. I am grateful to the institute for its help in ensuring that we get the shape of our legislation right. The amendments relate to the application of regulations under Section 41 of the Pensions Act 1995 to the personal accounts scheme. In short, current regulations under that section require an auditor to state that he or she is satisfied to a high level of detail about contributions made by each employer into the scheme. The requirement from the auditor's statement about all contributions to the personal accounts scheme will be costly and difficult to compile due to the sheer number of employers and workers participating in the scheme. An auditor may be unable to satisfy himself that contributions had been paid properly and may have to qualify the accounts and the audit will be of relatively little benefit to members.
	The principle of proper accounting is paramount, but it is true that this scheme will be of a different scale and type from other schemes, for which the provisions in the Pensions Act 1995 were primarily designed. We have been considering the matter with the delivery authority and have concluded that the approach that the ICAEW suggests is the right one. I am pleased to give an assurance that the scheme will not need to apply the provisions made under Section 41 of the 1995 Act.
	I can also confirm that no amendment to the Bill is necessary as we already possess the legal powers to achieve the objective of the amendment, either by regulations under Section 41 of the Pensions Act 1995, under Clause 116 of the Bill, or within the scheme order. In agreeing that the scheme should not need to apply the auditing requirements, we also agree that we need alternative assurance arrangements based on the principles of openness, accountability and probity. Those arrangements will need substantial consideration in their detail. I believe that the intention of Amendment No. 110DA is a good starting point from which PADA can consider the detail, although I was surprised to see that it reads "may" rather than "must". The detailed planning work has not yet been carried out, so it is too soon for us to agree to the final audit arrangements now.
	Fortunately there is no need for primary legislation to stipulate the assurance arrangements as the Bill's current drafting allows the scheme order to set out the arrangements. The scheme order and the rules will be the subject of full consultation next spring. I hope that my assurances on the scheme audit and the robustness of the financial controls are sufficient for the noble Baroness to withdraw the amendment.

Baroness Noakes: I am very grateful for what the noble Lord said. He has certainly gone further than the Minister went in another place when these or similar amendments were considered. On behalf of the Institute of Chartered Accountants I express thanks to the noble Lord for taking it this far. I am sure that the institute will want to read Hansard and, if necessary, return to his officials to clarify the position. From what I can tell, the outcome he proposed is entirely satisfactory. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Baroness Noakes: moved Amendment No. 110C:
	Clause 58, page 30, line 12, leave out subsection (12)

Baroness Noakes: I shall speak also to Amendment No. 110D. Both amendments concern the rules of the personal accounts pension scheme. Clause 58(12) contains various matters which the rules of the pension scheme must not contain; namely, its object and purpose, trustee appointments or removals, meetings, committees and exclusion of liability. I can see why this Bill, with the order creating the pension corporation, will set up the current view of how those things should work, but over time we will find that the Bill is deficient in some respects and that some things specified for good reasons at the outset will no longer have any relevance or, worse, actually create problems. However, I can see no reason for the Bill to face permanent restrictions on the ability of the pension scheme to evolve over time through rules. Surely it should not be necessary for the Secretary of State to be involved in every new order on things such as the appointment of trustees or committees. Amendment No. 110C, therefore, deletes subsection (12) in the interests of the long-term efficiency of the operation of the scheme.
	Clause 59(4) is slightly different. Under Clause 59, an order may allow the trustee, rather than the Secretary of State, to make rules, but subsection (4) allows the Secretary of State to impose a lot of restrictions and conditions on their exercise. Our fundamental position is that the Secretary of State should not micromanage the affairs of the new pension scheme. We hope that the trustee corporation will be chaired by a person of substance and that the other trustees will similarly be highly competent and respected. We think that they should be left to make up their own mind about rules. Why does the Secretary of State have to have the power to set up conditions and prohibitions? Amendment No. 110D removes subsection (4) on the basis that the need for those restrictions has not been established, and it is certainly not argued or explained in the Explanatory Notes. These two amendments would streamline the Bill and enhance the standing of the trustees, both of which are good things which I hope the Minister can support. I beg to move.

Lord McKenzie of Luton: Clause 58 enables the Secretary of State to establish the scheme and provides that it will be a trust, which, like all trust-based schemes, must be run in the best interests of its members. It also sets out provisions which must be made in the scheme order rather than the scheme rules. Clause 59 sets some general conditions for an order made under Clause 58 to deal, in particular, with the role and powers of the scheme trustee.
	Our intention has always been to allow the trustee as much independence as possible to run the scheme within the parameters of the order and rules and in the best interests of members. None the less we must ensure that the scheme meets the intentions of the wider reforms and, as the scheme is being set up to fulfil a public policy objective, it is right that there should be some limits on the trustee's powers set by the settlor, the role which is being undertaken by the Secretary of State. As settlor, the Secretary of State has a duty to set out, for example, the purpose of the scheme and the appointment of trustees. Those are of such significance that they must be included in the order and not the rules. The scheme order will in effect be akin to a trust deed in other occupational pension schemes and, like trustees of those other schemes, the trustee will not be able to change the provisions in that instrument. The scheme rules will be non-statutory, so the scheme order can provide for them to be amended by the trustee.
	Amendments Nos. 110C and 110D will allow the trustee to alter the fundamentals of the scheme through changes to the scheme rules. Amendment No. 110C removes the list of key aspects of the scheme which we believe should be set out in the order. Amendment No. 110D would remove the Secretary of State's power to place limits through the order on the trustee's ability to make rules. We think it important to have limits around what aspects of the scheme the trustee corporation can change and how the trustees can make changes to the rules. For example, we do not think that provision about the process of appointing or removing trustees should be a matter for the trustees themselves. Clearly, the trustees are involved in making appointments, but the rights under which they can do that should not be subject to change by them.
	We also believe that the order should be able to require trustees to consult before making or changing rules. Many noble Lords will, I know, be aware that it is a universal practice for pension scheme trustees to set out the parameters for the trustees' role. By setting these parameters in legislation we are making sure that some fundamental aspects of the scheme, such as its purpose and the removal of its trustees, are set out in the scheme order and therefore subject to parliamentary scrutiny. At this stage, we do not have precise details of what the scheme order or rules will include, but I can confirm that DWP officials and PADA are working on that.
	I should add that we will run a public consultation next spring to ensure that the order and rules package achieves the policy aims. As I have said previously, that will give all interested stakeholders the opportunity to consider and comment well in advance of the start of the scheme. I hope that has reassured the noble Baroness on why matters in the Bill are structured as I have outlined.

Baroness Noakes: I am grateful to the Minister for setting on record his reasons for drafting the Bill as it is. I can see why the rules should not affect the purpose or object of the scheme; I am much less convinced on such issues as,
	"meetings, committees or delegation of functions".
	Those appear to me to be quintessentially internal matters for the trustees to develop over time, and of no real concern to the Secretary of State.
	On the amendments that I mainly expect to speak to today, I will raise a number of issues that probe the role of the Secretary of State and the trustee corporation. We need to take an overall view on whether the balance of the ongoing involvement of the Secretary of State veers toward micromanagement, and whether that is inappropriate. On reading the Bill, my initial view is that the DWP's officials have gone overboard, as usual, in finding so many nooks and crannies of the trustee corporation for the Government to be involved in.

Lord McKenzie of Luton: It is fine if we discuss some of that detail in due course, but I draw the noble Baroness's attention specifically to Clause 62(2), which says that:
	"The Secretary of State may not make the order without the consent of the trustees"—
	that is, an order other than one setting up the scheme—and that the trustees have to consult members' and employers' panels. That seems quite a long way from the Secretary of State micromanaging the scheme.

Baroness Noakes: I thank the Minister for reminding me of that clause, which I was aware of, and I will take it into account when considering the role of the Secretary of State in the round. For today, there is no point in pursuing matters further and I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.
	Clause 58, as amended, agreed to.
	Clause 59 [Scheme orders: general]:
	[Amendments Nos. 110D and 110DA not moved.]
	Clause 59 agreed to.
	Clause 60 [Consultation of members and employers]:
	[Amendment No. 110E had been withdrawn from the Marshalled List.]

Baroness Noakes: moved Amendment No. 110EA:
	Clause 60, page 31, line 4, leave out from "by" to end of line 5 and insert "the trustees"

Baroness Noakes: Under Clause 60, there are to be panels of employers and members. We fully support that but find it difficult to understand why, since the effect of Clause 60(2) is that there should be these panels, the Secretary of State cannot just leave it to the trustees to get on with operating them. What ongoing interest will the Secretary of State have in determining the composition and functions of the panels? Surely that is the natural territory of the trustees, so my amendment is designed to remove the Secretary of State from the details of those panels. I beg to move.

Lord McKenzie of Luton: We anticipate that the membership of the personal accounts schemes will be very large, numbering in the millions, with members coming from a diverse range of jobs and backgrounds. We also anticipate that there will be many thousands of participating employers with no connection by trade or size. The size and diversity of membership presents the trustee corporation with a unique task in communicating with scheme members and participating employers. However, we firmly believe that the representation of these members and employers is vital to the scheme's success. That is why we have placed an obligation on the trustee to consult members and employers about the operation, development and amendment of the scheme.
	Furthermore, we have placed a requirement in the Bill for the trustee to set up panels to represent members and participating employers. These panels will have to be consulted by the trustee prior to any proposed changes to the order and rules. Setting up the panels to ensure proper member and employer representation is clearly not an easy task, and we have asked PADA to consider the options for their functions and composition. PADA has yet to reach its conclusions, but is considering similar panels operated by the Financial Services Authority and has met officials from pension scheme organisations such as Unite. Even when PADA makes its recommendation, we want the order to set out only the higher level composition and functions, which will leave the trustee and the panels with the flexibility to develop the roles of the panels once the scheme is fully functioning.
	The amendment allows only the trustee corporation to determine the composition and functions of the panels. That would mean that the panels could be realised only after the scheme order came into force and following trustee recruitment. While it is possible to grant the trustee sole discretion as the clause is now written, we believe it is appropriate for the Secretary of State to set the basic parameters in the scheme order. Personal accounts are being introduced as part of public policy changes affecting millions of individuals, many of whom have had little prior involvement with pensions. For this reason, there is considerable interest from the pensions industry and consumer organisations about how members will be encouraged to engage with the scheme. By setting the composition and functions of the panels in the order, stakeholders and Parliament will be able to have their say on the vital question of how members should be represented. We hope to publish the order on the rules consultation next spring. I hope that has explained to the noble Baroness why we have structured it this way. This is a considerable undertaking and there are some key high-level issues that it is right are dealt with by the Secretary of State through the scheme order.

Baroness Noakes: It is a question of judgment whether the matter is for the Secretary of State or for the trustee corporation, which we hope will be a free-standing organisation of some stature and substance in the pensions community. This is another area where the question is whether the Secretary of State's role is correct or too intrusive. For every involvement of the Secretary of State, somewhere in the Department for Work and Pensions there will be one or more job descriptions which include that aspect of involvement. One of the things we are concerned about is that we not only create a bureaucracy in the new trustee corporation but leave lots of pegs under which bureaucracy can thrive in Whitehall, which would not be the right outcome. I will consider that in the overall context. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.
	[Amendment No. 110F had been withdrawn from the Marshalled List.]

Baroness Noakes: moved Amendment No. 110G:
	Clause 60, page 31, line 6, leave out "members' panel" and insert "panels"

Baroness Noakes: Clause 60(4) states:
	"The functions of the members' panel may include nominating individuals to be members of the trustee corporation".
	I am not sure why the Bill needs to say that, because I thought that subsection (3) was wide enough to allow that. We obviously support members being on the panels, although we hope that the trustee board does not become packed with special interest members flying under the broad banner of members' interests. Given that the Government have chosen to put this in the Bill, the question is naturally raised as to why there is no mention of the employers' panel nominating individuals to be members of the trustee corporation.
	In another place, Mr O'Brien, the Pensions Minister, said:
	"Employers should not be represented on that board, because the trustees are all there to represent members' interests".—[Official Report, Commons, Pensions Bill Committee, 31/1/08; col. 320.]
	That rang alarm bells with me. We fully accept that the main duty of the trustees will be to work in the interests of members, but that duty cannot be seen in isolation. If the way in which trustees conduct themselves is contrary to employers' interests, that can only store up problems for the personal accounts scheme overall.
	When employers set up their own trust-based pension schemes, whether for DB or DC purposes, they draw up the documentation that sets out the various rights and obligations of the employers and the trustees. To my knowledge, that usually, if not always, includes the power of the employer to appoint some of the trustees. Of course, the trustees are there to act in the interests of the members, like all trustees, but they provide a conduit for the views of the employer. That occasionally causes difficulties in practice, but, overall, it provides many benefits to the efficient working of those schemes. I do not know a single employer with those arrangements who would want to operate in any other way.
	Of course, the personal accounts scheme is different. It is the default scheme and the voice of the employer at the trustee board will be less specific in nature than is found in an employer's own scheme—but so, too, will be the voice of the member. Both will be represented by representative groups. It seems to me that if something needs to be raised about how issues may affect employers versus employees, it is best that that is played out at the trustee board, rather than to have some key players in the whole success of this scheme being excluded. I believe that it should be possible for employers' representatives to be on the trustee board and that the use of the panels as the nominating mechanism is useful. I hope that the Minister will share my view that a trustee board that excluded the voice of the employer in its entirety would be likely to work against the overall success of the personal accounts scheme. I hope, therefore, that he will accept my amendment. I beg to move.

Lord Tunnicliffe: Consultation with both employers and members is essential to the success of the personal accounts scheme. The Bill requires the trustee to establish members' and employers' panels to ensure that the trustee corporation is informed of the concerns of these groups. This amendment would give the employers' panel the right to nominate members to the corporate trustee in the same way as the members' panel can. While the personal accounts scheme will emulate existing occupational pension schemes, it will be unique in scale. The members will be drawn from many thousands of employers and it is likely that many of these members will not have saved in a pension before, which is why it is particularly important that the members of personal accounts should feel a sense of ownership.
	All individuals who form the corporate trustee will have the core obligation to act in the members' best interest, rather than to represent any particular interest groups. It will not be possible for the trustee to meet the duty of acting in the members' best interest without taking account of the employers' concerns. It is the employers' panel role to ensure that it has the information to do this.
	It may be helpful to point out the different role of the employer in the personal accounts scheme. In a typical occupational pension scheme, the participating employer would set up the scheme. The personal accounts scheme is being set up specifically for those employers who do not currently offer access to a workplace pension. If an employer chooses to use the personal accounts scheme, he will not be involved in the running of the scheme. The main focus for employers using the personal accounts scheme will be its efficient administration. If an individual employer has any concerns or problems with the administration of the scheme, he can raise this with the administrator or through the employer panel.
	The role of the employer panel will be important; the panel will ensure that the views of the wide range and diverse nature of employers using the personal accounts scheme are heard. Ultimately, however, the members are the beneficiaries of the scheme, so they should have a greater stake in how it is run. It is for this reason that we have given only the members' panel the right to nominate individuals to the trustees. We feel that this is the right balance. I ask the noble Baroness to withdraw her amendment.

Lord Oakeshott of Seagrove Bay: I listened carefully to the Minister's reply but it did not really explain why there was a distinction between the two. I am not persuaded by his reply. This is, after all, only an enabling clause; it does not say that they have to be nominated. I am with the noble Baroness on this.

Baroness Hollis of Heigham: I am puzzled at the noble Lord's response, although I can understand where the noble Baroness is coming from. This is a DC scheme, whereas all the assumptions about employer contribution and activity are based on models of a DB scheme where the employer has set up the scheme and is actively contributing but is also expected to honour the pension promise, underpinned by the PPF. This is a DC scheme, in which the disinvestment risk and, to some extent, the investment risk, is carried by the members. The amount of risk carried by the employers is non-existent. Clearly their views matter and will be picked up by an employers' panel, but I cannot see the place for employers in a money purchase scheme; it has nothing to do with employers apart from their contributions, which are laid down by statute.

Baroness Noakes: I am disappointed in the noble Baroness. In employer-based DC schemes, as well as trust-based DB schemes, employers do take part. The noble Baroness says that we are interested in employers only for their money; fortunately, the Minister went a little beyond that and said that the Government wanted to hear the views of employers through the panel.

Baroness Hollis of Heigham: I actually said that we would expect to hear employers' views through panels, which I welcome. I was making a distinction between that and where the risk lay and therefore where the responsibilities of trustees should reside. That is a different point.

Baroness Noakes: The issue of risk does not necessarily drive how to create an effective trustee corporation board. The important thing is that all the right issues are raised and discussed at that board. If the noble Baroness looks at the example of how conventional DB and DC trust-based schemes work, she will see that they are mixed, with employee-nominated and employer-nominated people. They all have the duty to act for the members—there is no question about that. But the issue is how effectively to deal with those concerns.
	There are two panels—one is invited to put its people on to the board and one is invited to stay at arm's length. Issues will arise that need employer input. That is the way in which the scheme operates. It is all about information flow and how employers deal with the interface on behalf of their employees. The construct that the department has and the noble Baroness seems to have—that employers are there to be consulted but are not really part of the process—may in the long run create an ineffective organisation because it does not have all the right interests welded into its operation. Having a consultation panel is not the same as having people on the board if other consultation panels appear to dominate the scheme.
	I am not trying to make a case for employers dominating a scheme or doing anything other than acting in members' interests. I should like the Government to think again about whether it is the right answer to exclude employer representatives from the panel. The experience of existing employment-based provision suggests that this is fundamentally a good process. It sometimes causes difficulties but, overall, it allows a forum in which issues can be raised. I hope that the Government are prepared to look at this again. I am not seeking to put forward an employer-dominant case; I am just concerned about the efficiency of the scheme.

Lord Tunnicliffe: We have not heard anything to date that would cause us to change our mind. However, if the amendment is not pressed to a vote, we will reflect on the noble Baroness's words between now and Report and may come to a different conclusion.

Baroness Noakes: I am grateful for the Minister's comments. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.
	Clause 60 agreed to.
	Clause 61 [Contribution limits]:

Baroness Hollis of Heigham: moved Amendment No. 111:
	Clause 61, page 31, line 12, at end insert "and must provide that additional contributions may be made by or in respect of a member in any tax year to make good the shortfall where contributions fell below the maximum amount in a preceding tax year or years"

Baroness Hollis of Heigham: I shall speak intermittently also to the other amendments in this group, but I reserve the right to respond to the noble Baroness when she develops her arguments. This is a probing amendment which will, I hope, provoke us to spend a moment or two discussing the adequacy of personal account pots. I am sure that the amendment is technically deficient; I am not sure that it is even technically necessary, as my noble friend the Minister may tell the Committee.
	The point of personal accounts is to ensure that low-paid workers—poorer women in particular—are encouraged to save for their retirement, but some of them may have a pay-to-save debate, which is an issue that we have explored under previous amendments. I have in mind the amendment of the noble Baroness, Lady Thomas, on advice, and Amendment No. 89 of the noble Lord, Lord Skelmersdale, on means-testing reviews. Therefore, such workers need, as I hope your Lordships may agree, a full basic state pension as well as much state second pension as possible. However it is important above all that the personal account pot is as large as possible. Only that will securely float savers off, and allow them to stay off, pension credit.
	If the Committee will bear with me, I shall give some figures so that they may be recorded in Hansard—I am sure that your Lordships are already familiar with them. Over 40 years, a woman on median earnings of around £21,000 will build a pot of around £190,000, or about £14,000 a year on a level annuity—half of that on an indexed annuity. I am grateful to the IMA for these figures. On half of median earnings over 40 years—£11,000—that pot will be £65,000, or £5,000 a year on a level annuity and about half that on an indexed annuity. Now we come to the risky area: over 20 years, if a woman starts saving at 45 and stops at 65, the woman on median earnings will retire with a pot of £45,000, or £3,500 on a level annuity and £1,750 on an indexed annuity. If she has half of median earnings—that is the woman whom personal accounts should seek to help in particular—is working from 45 to 65 and paying into a personal account pot, she gets a pot of £16,000, or £1,200 a year on a level annuity and £600 a year on an indexed annuity, possibly within the range of trivial commutation depending on how it is developed.
	A pot of £16,000, 20 years' saving and trivial commutation is much higher than the cut-off point for pension credit, an issue to which we shall return on a much later amendment. However, I think that your Lordships can already see where the rocks are. Over and beyond issues of housing benefit and its tapers, the problem is for older women who are low paid, who save for a limited period and as a result have pots which may interlock them with a pension credit system depending effectively on the income of any second person in the household. If their partner or husband has a generous pension, they will not come within pension credit; if they do not or if they are solo, they will.
	If some women a little above the trivial commutation figure take a level annuity, they will probably be free of pension credit in opening years but increasingly dependent on it in later years. If they take an indexed annuity, which they probably will not, they will need less pension credit but need it earlier. If they do the sums, they may decide not to save.
	So the answer, I repeat, is to help them to build a bigger pot. It is absolutely key; it is the only decent, affordable and deliverable way in which to make it worth saving. That is why, as I understand it, I am opposed to the amendments in the names of noble Lords opposite, Amendments Nos. 111A and 111B, which appear to ban the possibility of an employer seeking to contribute more than 3 per cent. If the employer wishes to contribute more than that—because after all, if it was a conventional DC scheme, he would pay in 6 per cent on average—why should he not? It would not only be a decent thing to do, given the current state of DC schemes, but it would allow the pot to build. We can perhaps argue that point more fully in a moment. We can look at the trivial commutation level under a later amendment.
	We can look, as a way in which to build a bigger pot, at unisex annuities, so that women get a better return from their pot, as I am sure the noble Baroness, Lady Howe, will argue later. They can shop around for a better return, as the noble Lord, Lord Oakeshott, has argued. All these are ways in which to help get better value from the pot and possibly to disassociate that pot from interaction with means-tested benefits. Above all—and this refers to a previous amendment that I moved, to which I will almost certainly return—we need to look at removing the £5,000 threshold. If we did that, we would double the pots of women on half-median earnings and transform the situation; they would go from £16,000 to £32,000 at a stroke.
	For poorer women, possibly the single most important issue in the Bill that we will address is the ability for them, if they choose, to come into a pension scheme at nil earnings if they were already in it and then have a matching contribution. It is the only sure way in which they choose to build a bigger pot and ensure that it pays to save. If noble Lords opposite agree, as I am sure they do, and are concerned, as I am sure they are, about the worries of means-tested benefits, they should really help us to build bigger pots, and not seek to press amendments that cap the pot size. If they do, they lock poorer, older women into means-tested benefits.
	This amendment tackles the problem in a different way—and in a way that is frankly less satisfactory than the way I would like to see. It would increase the contributions paid in particular years, which could be done by exceeding the contribution cap in any one year by £3,600, adding a right to transfer up to £10,000, say, from a small inheritance or a lump sum from divorce pension sharing, or by including small, stranded sums. That is something that I want to raise under the next amendment from the noble Baroness, Lady Noakes, or the noble Lord, Lord Skelmersdale. None of us wants to recycle money from existing schemes and destabilise them, but sometimes people acquire small, stranded pots and it would be useful for them to corral them into their personal accounts.
	Another way is to allow people to pay in for missing years, which is what this amendment does. My noble friend may argue, and he may be right, that that should not be necessary. In practice the limit of £3,600 caps you at some £40,000 a year. In practice a woman on half-median earnings will contribute £1,000 a year and, on median earnings, £2,000 a year; simply upping their own regular contributions beyond that minimum would help but it would not attract additional employer contributions, especially if a subsequent amendment were to have any support in the House.
	The other way in which to bring new money into what was clearly not drawn from the existing scheme is to allow contributions to make good missing previous years. That seems to me an innocent way forward to deal with this problem. I refer to those years in which people did not pay into a pension at all because they were not in work, they had children or were looking after an older person. Of course, they might have continued while not in work, but financial pressures may have interrupted their contributions. But several years later, possibly because they had a small inheritance or possibly a pension-sharing lump sum on divorce, they acquire a lump sum of £10,000 or £15,000, and they can see that they have missed the five previous years. This amendment would allow them the financial head space to put the whole sum in rather than having to drip-feed it in over later years between what they should pay in under the 8 per cent and the maximum cap available. That drip-feeding lowers their investment returns.
	It is a modest amendment, a probing amendment and not a very satisfactory amendment. It is one of several ways in which we could, I hope, help lower-paid women to build up their pots. If we do not help women to do that, the pay-to-save argument, the fear of mis-selling and issues of advice about whether women should or should not auto-enrol will loom ever larger as 2012 approaches. I hope my noble friend will pay serious attention to the reasons behind an amendment such as this. I beg to move.

Baroness Noakes: Perhaps the noble Baroness would let me speak to my amendments in this group. We could then deal with all the issues covered by this group of amendments. I have grouped my amendments here because the noble Baroness, Lady Greengross, tabled Amendment No. 112 in this group. I had not intended to group my other amendments with those of the noble Baroness, Lady Hollis, but since I have done so, I shall speak to the amendment of the noble Baroness.

Baroness Hollis of Heigham: I was somewhat surprised.

Baroness Noakes: My purpose was to group my amendments with Amendment No. 112, that of the noble Baroness, Lady Greengross. I have some sympathy with the amendment of the noble Baroness, Lady Hollis. She has helpfully clarified that she was referring only to employee, or individuals', contributions, and that did not carry any sense of backdating employer matching for any purpose. That is fine. My concerns are practical rather than theoretical. The amendment will involve considerable additional complexity for personal accounts, which would then have to track records of contributions year by year. That record could extend for up to 50 years if somebody started contributing at the age of 16 and stopped when they were somewhere in their sixties, or possibly even older. This Bill allows contributions up to the age of 75, so I will change that to 60 years or more.
	Anybody who knows anything about NIRS2, the system for recording NI contributions, as I am sure the noble Baroness, Lady Hollis, does, will know that recording, maintaining and holding details of contributions over these very long periods is neither easy nor cheap. I have a very real concern about the additional burden that the amendment would place on the implementation of this scheme, particularly in the design phase. From what I understand about their attitude, those running PADA would run a mile from that complexity. I am also concerned about the cost of doing this, and the impact on the cost limit that we were aiming at. This was set at 0.3 per cent or 0.5 per cent; we will come to that in due course. That limit is already under some stress. Those difficulties of both complexity and cost pressure are real. At heart, the amendment is sensible, but the practicalities may be very difficult to cope with.
	My amendments in this group address the broad theme of not allowing personal account schemes to crowd out private pension provision. In that respect, it addresses some of the issues raised by the noble Baroness, Lady Hollis, when she spoke to her amendment. We are concerned, as are such organisations as the Association of British Insurers, that the personal account scheme will become a vortex, sucking in all manner of pension contributions and other savings so that, at the end of the day, existing pension and savings-product providers will find it difficult to compete.
	To be clear, we stand for healthy competition, but competition from a state and statute-backed backed pension provider may not be healthy if that becomes the default repository for all long-term savings from large swathes of the population. That will, in turn, weaken the UK's financial services industry, a major contributor to our economic growth. We interfere in this sector at our peril. We agree with the Government—and, probably, with all sides of the House—about the need for greater pensions saving. We are not apart from the noble Baroness on that. We certainly support the creation of the personal accounts scheme if it can be delivered. Our support is tempered by the need not to create some kind of nationalised industry, which brings unfair competition to private-sector providers.
	Let me deal with some of my amendments. Amendment No. 111A explicitly states that employers should not contribute more than the 3 per cent that the scheme is based on. The noble Baroness is shaking her head, but let me explain. The rationale for this is that personal accounts should be a default scheme for those employers who want to contribute the minimum. If they want to contribute more, they should research something like group personal pension schemes, to allow them to contribute higher amounts to a workplace-based pension scheme for themselves. We must not let the personal account scheme crowd out people who want more than the default, and should therefore go out into the market to find other options for their employees.

Baroness Hollis of Heigham: I am grateful to the noble Baroness for giving way. Why should they go out into the market? I can see that they might wish to do so, but why push them into the market if they would prefer the simplicity of adding to the existing personal account contribution? Why place additional burdens on business?

Baroness Noakes: They then do not go into personal accounts and add to them; they go into another form of scheme. If they choose to do more for their employees, we must not discourage that. At the same time, we do not wish to divert pension savings from pension providers that are part of the backbone of our financial services industry. There is a great danger that this scheme, in the way that it is set up, will become a magnet, attracting all forms of additional contributions from all over the place. Some will be from employers and some from employees; we will come to that. That is the reason. My amendment does not preclude higher employee contributions, which is what the amendment of the noble Baroness was about. It is a default scheme, where employers contribute the minimum and that is it. If employers want to do more, they should be out in the marketplace.
	Amendment No. 111B is designed to place in the Bill what we understand to be the Government's policy; namely, that there will be a maximum contribution level of £3,600 for any employee in any year. I have provided that this should be uprated in the same way as the earnings band under Clause 13. It is logical that the band should be increased; that should be provided. The £3,600 limit allows contributions to rise above the minimum allowed by the band, but not by such a huge amount that it would start to displace private sector provision. The earlier proposal for a £5,000 limit, as the Minister will be aware, generated considerable opposition from the pensions industry, which remains concerned about the Government's intention. The Government have said that it is their policy. If that is the case, they should be prepared to place it in the Bill.
	Amendment No. 111C deletes subsection (3) of Clause 61, which allows the Secretary of State to prescribe an amount for top-up payments to be made by a member. The noble Baroness wants this subsection to be made mandatory. We believe that the Bill should specify an annual amount for contributions to the scheme, but the scheme should not get into the general investment business. Staying with the power, in Committee in another place, the Minister sometimes talked about a £10,000 limit under subsection (3) and sometimes about a higher limit, and even a lifetime limit. On Second Reading, the Minister said that the Government wanted flexibility, both in the amount of top-ups and for the period from which they will be allowed. I am not sure what the Government's policy is. We have heard many figures and the traditional reference to flexibility. Could the Minister provide more clarity on that?
	We believe that the personal account scheme is fundamentally about annual contributions to pensions, to build up savings for retirement. It is not designed to be an all-purpose investment vehicle. There should be no possibility of the Bill turning it into that. As I have mentioned, this will be a nationalised undertaking. All past evidence is that when nationalised industries compete in competitive markets, they operate relatively badly. However, when there are market imperfections, which there could be if we are not very careful with the Bill, they tend to clean up. That would be a very serious problem if the personal accounts scheme achieves that by trading from its position as a government-backed organisation with no effective capital market disciplines constraining it.
	There is also a question of whether members will properly understand any ability to deposit additional money into the personal account scheme. Such payments will not attract any employer contribution—the noble Baroness, Lady Hollis, made that clear—and may attract tax relief; and, if fair competition rules the day, would not get tax relief. Again, the Government have not said what their position is in relation to additional payments.
	Both issues are vital to an understanding of whether it is a good deal to invest in the personal account scheme. The problem is that members could easily be misled by the general information provided by personal accounts. They could be misled into thinking that their additional contributions could produce the same returns as their annual contributions, which it is virtually certain will not be so, if only because they do not get the employer contribution on top of their top-up payments.
	The API has pointed out that top ups could be made in an advice-free zone if the personal account scheme was allowed to take them, and that members are very likely to make investment mistakes. Does anyone really want to get into the sort of mis-selling scandal that could be involved? The Government will have set up and be standing behind the personal account pension scheme, so we can expect mis-selling problems to end up, ultimately, on the Government's door step.
	The Government may well think, as I am sure will the noble Baroness, Lady Greengross, that Amendment No. 111C, in removing the power in proposed subsection (3), is too hash. If so, the Government should come off the fence and say what they intend to do and argue that on the basis of an amendment to place in the Bill whatever limits and constraints there are. A debate can then be had, in particular with those in the pension provisions industry, about the impact of that on existing providers, on the future flows of investment money and the impact on the financial services industry generally.

Baroness Turner of Camden: I received a lot of briefing from the TUC on Clause 61. I say at the outset that I agree with a great deal of what my noble friend Lady Hollis said in moving her amendment. The briefing caused me to give notice of my opposition to the whole of Clause 61, but that was simply a way of being able to say what I have to say about the clause. The problem is that there is not enough flexibility. There should be flexibility for individuals to put extra money into their personal accounts when they can, perhaps when they receive a small inheritance, there is a divorce settlement, when some kind of investment matures, or perhaps with some saving through something like an ISA.
	The argument for allowing such additional contributions is that personal accounts will build up to a significant pension only if employees contribute throughout their working lives. Not everybody can or is willing and able to do that. In particular, that may not apply in the case of older workers who will start to save for a pension for the first time when personal accounts commence in 2012. Moreover, there are the working patterns of many women, to which my noble friend Lady Hollis has devoted quite a lot of time. They are much more likely to have breaks in pensionable employment due to child rearing and caring responsibilities, to work part-time or to be in low-paid employment that does not give them the opportunity to build up significant savings for retirement.
	Anyone who has missed out on the opportunity to contribute may want to catch up later in their working life. It would be sensible to encourage this and to increase personal responsibility, which has always been a key government objective in the Bill as in other respects. It seems odd that the new system should forbid extra contributions of a size that would probably not make much sense if invested elsewhere in a separate private pension. People in the target market, with no experience of private pension arrangements, would probably be put off from seeking a further pension product.
	As indicated earlier by the noble Baroness, Lady Noakes, I suppose that there is the possibility of unlooked-for competition with private investment business. On the other hand, the sort of people for whom this Bill is intended to provide benefits are not liable to be tempted into other investments if they are putting their pension investment into this scheme. It is intended, as everyone has said from the beginning, for people who are not well paid and who otherwise would not have any occupational pension provision except through the personal accounts scheme. If the scheme does not allow them sufficient flexibility to contribute, when can they contribute so that when they actually retire they have a pension entitlement that enables them to lead a reasonable life? They will be forced on to the benefit scheme, as indicated by my noble friend Lady Hollis. I hope that the Minister will consider carefully what has been said about the possibility of allowing extra payments in order to make absolutely certain that when people retire they have adequate retirement benefit.

Baroness Noakes: As to the advantages of putting pots of money into something like a personal account scheme, there are no tax advantages compared with ISAs. In fact there is a big disadvantage in that, having put it in, you can get out only 25 per cent as cash; the rest you have to take as an annuity. So it is a restriction and it may not be advisable to lead people to think that that is where they should put their money. Has the noble Baroness thought about that?

Baroness Greengross: At this stage I will speak to Amendment No. 112 standing in my name and to the other amendments in the group. I particularly support Amendment No. 111 tabled by the noble Baroness, Lady Hollis. Like my amendment, it is aimed to promote flexibility. I am grateful to the People's Pension Coalition and to the organisation Which? for their advice on Clause 61.
	While I have some sympathy with what the noble Baroness, Lady Noakes, has been saying, I think that her amendments promote inflexibility in personal accounts for the reason she outlined. Amendment No. 111B fixes in primary legislation the amount of the annual contribution limit at £3,600, which will mean that it is very difficult to vary it. The strict annual limit of £3,600 per year, uprated from 2005 prices, is very inflexible, given the Government's other pension reforms, which have swept away and tidied up so many other pension rules. I understand that this annual limit is the result of consensus built up following the report of my noble friend Lord Turner. Were it not for that, I would be attempted to suggest no upper limit at all.
	I do not think that this provision would crowd out the other schemes that the noble Baroness, Lady Noakes, talked about because it is targeted at a group of people who currently tend not to save at all and tend not to get involved in a private pension scheme. It is a bit like the levelling-down argument; I do not feel that this would damage the industry and I certainly would not wish to do so. I feel that it will not.
	Amendments Nos. 112A to 112C seek to set in statute what the Minister has already committed to—that transfers in and out should not be permitted before 2017. I have more sympathy with those amendments, given the consensus that personal accounts should be given a period of time to get established before we consider whether transfers in or out should be permitted. However, what happens if PADA or the wider pensions industry realises that some kind of flexibility is needed before 2017? It will not be possible to make that happen without another DWP Bill, and even then it would take a lot of time. For instance, this Bill will be in Parliament for almost a whole year before it gets Royal Assent. As Which? has already pointed out, one type of transfer into personal accounts will already be permitted: the unvested money when someone leaves an occupational scheme before reaching the end of the vesting period, usually two years. Meanwhile, the other place—especially a member of the noble Baroness's party, John Greenway MP—has grappled with the thought that some people may have a legitimate reason for transferring funds out of personal accounts prior to 2017; migrant workers returning home, for example.
	I do not like inflexibility. The object of my amendment is to build greater flexibility into the contribution limits of personal accounts. It is a probing amendment. I am not sure that the wording "must" is the best way to achieve this and accept that some work needs doing on it. However, the point is that we want people to save more. The contribution limits for personal accounts do not seem to encourage this on a voluntary basis.
	I understand the Minister's desire for simplicity. I also understand PADA's desire to be able to market a simple low-cost scheme to personal account members. The 4-3-1 idea outlined by Tim Jones is a form of "BOGOF": buy one, get one free. If the employee contributes 4 per cent, the employer must contribute at least 3 per cent and tax relief tops it up with another 1 per cent. My amendment would not confuse that message of simplicity, as that message relates to those who are auto-enrolled into personal accounts and will be getting an employer contribution. My amendment would apply to those who made contributions voluntarily, who would not necessarily have an employer contribution. I should like to see greater flexibility there.
	Specifically, the amendment would require the Government to prescribe additional contribution limits into personal accounts in addition to an annual contribution limit. Rather than "may", they "must" do so; as I said, the wording needs some attention. The sort of additional limits I had in mind are a lifetime lump-sum limit, or a higher contribution limit in the first year; another would be to enable missed contributions to be made up at a later date, tying in with the amendment of the noble Baroness, Lady Hollis, which seeks to do just that.
	Which? believes that to support saving in the run up to 2012, consumers should be able to put aside money for their retirement which would be then rolled into personal accounts in the first year; others have also suggested it. I know that the Minister is sympathetic, too—he indicated as much at the briefing session on the Bill that I hosted for Peers prior to Second Reading. More to the point, the Government's White Paper actually suggested a £10,000 limit in year 1. Perhaps the existing ISA vehicle could be used for this purpose in the two years leading to the "go-live date"—that is, from April 2010.
	The Government should also examine the feasibility of establishing a lifetime limit in addition to the annual limit to allow consumers to pay in lump sums, such as an inheritance, redundancy payments or bonuses, or to make up missed annual contributions—the subject of the amendment of the noble Baroness, Lady Hollis. This sum could be around £50,000 across a member's lifetime. If this is not acceptable to the Minister, then I would agree with the noble Baroness, Lady Hollis, that personal account members should be able to, as her amendment says,
	"make good the shortfall where contributions fell below the maximum amount in a preceding tax year or years".
	My simple amendment would be consistent with the Treasury's publicly stated desire for pension saving to be flexible. I could not put it better than HM Treasury itself when it concluded, in its review of pension tax simplification in 2003, that,
	"those on modest earnings who leave their pension savings late will not find that they are restricted in the amount of extra contributions they can make each year".
	Perversely, personal accounts may fail this test without Amendments Nos. 111 and/or 112.
	Which? research found that 70 per cent of people agreed that there should be flexibility about how much can be paid into a personal account. Flexibility will allow people who take career breaks, or who have fluctuating incomes, to make up contributions in other years.

Baroness Noakes: Can transfers be covered by an order under subsections (1) or (3) of Clause 61? I ask that because the noble Baroness, Lady Greengross, has spoken to transfers, which I was intending to deal with in the next group of amendments. If the Minister believes that subsections (1) or (3) of Clause 61, which are the objects of these amendments, can cover transfers in and out, I will need to speak to my amendments in the next group at this stage for the convenience of the Committee. Looking at the clause again, I was not quite clear whether existing powers could specify transfers in and out.

Baroness Hollis of Heigham: Without prejudicing my noble friend's reply, even if they do I hope that the noble Baroness will resist the temptation to run those other amendments in with this. The group will just become too large; we are picking up three or four themes already. I would hope that the distinct issue of transfers would be separately addressed.

Baroness Thomas of Winchester: I support Amendment No. 11 of the noble Baroness, Lady Hollis. I am glad to be one of the usual suspects led by the noble Baroness whose mission in life in this context is to try to help low earners with irregular working lives, usually women, save enough for a better pension.
	We on these Benches support the amendment, which, as we have heard, would allow employees to make contributions into personal accounts over and above the annual contribution limit in order to make good any shortfall in the preceding year or years. As the noble Baronesses, Lady Hollis and Lady Turner, have explained, this would particularly help women with broken work records in one year to top up their contributions as their circumstances improved in the next. It would also help older workers who will not start to save for a pension until 2012 and who will need all the help they can get to build up a significant pension by the time they retire. Neither should we forget what could be another group: those who have not been pensioned yet and leave it comparatively late to start saving for a pension because of debt problems at the start of their working lives. This last group may be graduates with student debt, whose earnings are generally expected to be quite high—but that will not necessarily apply to all graduates or all people with large debt problems.
	Last week, we heard about the Government's plans to help women gain salary equality with men. Bravo for that, but in other fields there is clearly a long way to go before financial equality between the sexes is achieved. Women need the Government to understand how difficult it is for many of them regularly to put enough money by for a pension and why flexibility in the annual contribution limit for personal accounts is desirable, so that they have the option of making good a shortfall if their circumstances change.
	To those who say that employees can find other pensions savings schemes besides personal accounts into which they can deposit any extra funds they have available, as the noble Baroness, Lady Noakes, said, research from the consumer organisation Which?, cited by the noble Baroness, Lady Greengross, shows that anyone wanting to make such contributions above the annual limit may struggle to find an appropriate pensions vehicle outside personal accounts. One reason is that the pensions industry does not offer cost-effective alternatives. Which? found that 52 per cent of people would be put off saving more by the,
	"hassle of finding and opening a separate pension plan".
	Which? also makes the comment, which is worth repeating, that the Treasury, no less, was quoted as saying that those on modest earnings who leave their pension savings late should not find that they are restricted in the amount of extra contributions that they can make each year. That was in a paper entitled Simplifying the Taxation of Pensions of November 2003. Perhaps the right hand of the Government should take account of what the left hand is saying. I urge the Government to accept if not the amendment, then the spirit of the amendment.

Baroness Howe of Idlicote: I have listened very carefully, but I cannot pretend that I have understood every word of what has been said. I certainly get a very strong message on Amendment No. 111, which was so ably moved by the noble Baroness, Lady Hollis. What comes over to me is that certainly we do not want to have competition for the poor old insurance industry in respect of large sums of money, which of course should go to the market and get the best price. It is clear that we are not talking about those. I hope that personal account pots will be attractive to women who probably would not be saving at all but for them. Certainly, if one looks at the older woman who has had far less opportunity to save, and we look at why the women are probably poorer—because they have been saving the state huge sums of money in their caring capacity—surely we should to a certain extent look at this as compensation.
	It has been strongly stressed that there is a need for flexibility, which has come up on many amendments. In this area, it is surely absolutely right that there should be the possibility of paying in some lump sum that one might inherit, or if a husband gets an extra windfall that he is prepared for it to go to his partner's pension. As Which? has said, if above all flexibility is what is needed and is seen as important by the people who go to Which?—my goodness, it has so much basic experience of this group of people that it really knows what it is talking about—surely we should back the approach of the noble Baroness, Lady Hollis. It may not be perfect, and she has admitted that nearly all the amendments are probing amendments. I, too, have some sympathy with what I think my noble friend Lady Greengross is trying to achieve.
	I hope that the Government will look very carefully at allowing greater sums of money—be they £10,000 or £15,000 or as high as £50,000—if that is not going to get everyone in a state again about doing down the poor old insurance industry. I am very much one of the usual suspects here.

Lord Oakeshott of Seagrove Bay: I wonder whether I, as the first man to speak in this important debate, can join the usual suspects. We have been talking about the poor old insurance industry. I had a charming letter today from the Association of British Insurers thanking me for my contributions on previous days of debate. I appreciated that, but I do not think that I will be getting another letter from it on what I am about to say.
	We on these Benches oppose the Conservative amendments. The noble Baroness talked about the fears of the Association of British Insurers and the industry about what I think she called a vortex, sucking in all manner of pension contributions. Frankly, if only anything could suck in more contributions from all around. Saving in this country has collapsed in the first quarter to 1 per cent of income. We should be very careful about restricting any vehicle that is efficient, low-cost and targeted to lower income people. As my noble friend Lady Thomas said, we do not really support limits as restrictive as they are here. It is a pretty open question whether there should be any limits at all on contributions into personal accounts, because we are desperately keen to encourage saving and we favour maximum consumer choice.
	The noble Baroness, Lady Noakes, asked the noble Baroness, Lady Turner, why people would want to put extra money into personal accounts when they could do an ISA. As we have heard, there is the extra complication for people of doing so, but part of the argument is that personal accounts are low-cost and efficient. ISAs are quite expensive. The whole point of personal accounts is that it is a low-cost, straightforward scheme. Also, people, perhaps particularly women, might not want something that is too easily accessible. There is a certain feeling that people might want to tuck something away for their old age. Why are we restricting consumer choice here? I do not believe that the insurance companies should worry, except in so far as they are not behaving very well.
	The Daily Mail last Wednesday pointed out that:
	"Tens of thousands of savers with money in old work pensions are being hammered with higher charges",
	and that two of the main companies have put up the charges from 0.4 per cent a year to 0.75 per cent and from 0.37 per cent to 0.67 per cent respectively. This is where people have moved on, have small pots left in old schemes and are in a sense trapped in those schemes. It is perfectly reasonable and it is a good competitive position that if they are being squeezed in that way and if they want to do so, they should be able to take the money out and put it into personal accounts. The insurance industry should not worry so much. Personal accounts are here to help. They maximise consumer choice and they will particularly help low-paid people and women with broken records who are not saving for a pension. We should be much more positive about them.
	We have heard already, and I will not repeat, the very good points made by the members of the People's Pension Coalition, which we support. I remind noble Lords of the report on personal accounts by the Work and Pensions Select Committee in another place, which was very much encouraging last year a more open and less restrictive attitude. I will not read them out, but there were responses from the Government at that stage looking at additional contributions and additional flexibility, and I would be interested to know where the Government's thoughts have got to on that. We are very much in favour of opening things up and de-restricting. Heaven knows any form of pension saving in this country must be made as easy as possible.

Lord McKenzie of Luton: I thank everyone who has spoken in this debate; the usual suspects plus one. It has been fascinating, and it has covered a range of different views and perspectives. My role as Minister is to disappoint everyone. I say to the noble Baroness, Lady Greengross, that to quote Treasury edict to DWP Ministers is grossly unfair.
	It has always been our aim that personal accounts schemes should complement rather than replace good pension provision. As noble Lords are aware, we have made a commitment to introduce a number of measures to focus the personal accounts scheme on the target market of moderate to low earners. The key measures in this respect are an annual contribution limit and a general ban on transfers to and from the scheme. To deal with the question asked by the noble Baroness, Lady Noakes, about where transfers fit in, a ban on transfers into personal accounts, subject to the exceptions, will be in the scheme order, and transfers out will be prohibited under Clause 111. Clause 61 is to do with contribution limits, and those are the mechanisms to deal with transfers.
	As I said, the key measures in this respect are an annual contribution limit and a general ban on transfers to and from the scheme. Clause 61 provides for the introduction of the contribution limit and the review of that limit in the future. I have listened with great interest to the points made on all sides of the Committee. Contribution limits are clearly a key issue for all who have spoken, and I know that interest is not limited to this House. Throughout the development of the personal accounts policy, we have listened to the views of a wide range of stakeholders, and the clause is a direct response to the consultation.
	The Opposition may believe that I overuse the word, but I cannot think of a better example of establishing consensus than in the development of our policy around contribution limits. The majority of stakeholders agree that a balance has been struck between, on the one hand, focusing personal accounts on the moderate to low earners and not impinging on good-quality existing provision and, on the other hand, making sure that personal accounts can cater to the needs of their members. We are committed to an annual limit of £3,600, but based on 2005 earnings, which will be uprated in line with earnings to 2012 and beyond. This gives assurance to pension providers that personal accounts cannot take the place of existing products but will enable saving beyond the minimum for the majority of personal accounts.

Baroness Noakes: The Minister will be aware that other figures have been talked about by his honourable friend in another place. The pension industry is concerned about the level of that and indeed is content with £3,600 uprated in line with earnings. There is a lack of clarity. Would the Minister not consider putting this—with the appropriate formulation so that it calibrates itself correctly—on the face of the Bill?

Lord McKenzie of Luton: I do not see that we need to do that. The £3,600 figure has been around now for a while. I know it started at £5,000, there was a big debate around it and there is still discussion about a one-off £10,000 contribution and a lifetime limit. I will come to that. The £3,600 has, however, been around for some time. We are committed to it. I believe stakeholders know where we stand. I cannot believe there is any misunderstanding out there. If there is, we are always happy to seek to clarify and to confirm the Government's position. We have, however, been very clear on that for a long while.
	The £3,600 limit gives assurance to pension providers. Personal accounts, as I said, cannot take the place of existing products but will enable saving beyond the minimum for the majority of personal account members. Even somebody earning above the upper limit of the earnings band would receive about £840 per year in employer contributions and, coupled with the employee contribution including tax relief, this would increase to £2,240. This leaves ample headroom for both employers and employees to contribute more if they so choose. My noble friend Lady Hollis talked about someone on half median earnings with contributions of £1,000, which leaves considerably greater headroom.
	I will now turn to the amendments on Clause 61. Amendments Nos. 111, 111C and 112 all addressed the issue of a lifetime contribution limit. We considered the concept of allowing a further limit to run alongside the annual limit as part of our White Paper consultation and decided that allowing such a facility warranted further consideration and discussion with PADA. Consequently we have allowed for a discretionary power on the face of the Bill. Allowing for saving beyond the annual limit has merits, as my noble friend Lady Hollis and the noble Baroness, Lady Greengross, have described, as have others. Such a facility may help women and others who take career breaks to undertake caring responsibilities who may wish to make additional contributions in later years to compensate for this shortfall. We are still considering this facility but we need to bear in mind the need to avoid additional bells and whistles when the scheme is introduced. Each additional design feature will add costs, which will be paid for by the scheme members. It is also important to remember, as I said earlier, that the annual limit provides considerable scope anyway for one-off payments.
	The Personal Accounts Delivery Authority has provided us with detailed advice on the cost and operational complexity of introducing a lifetime lump-sum facility. We are considering its advice carefully and will make our decision in due course. Amendments Nos. 111, 111C and 112 would pre-empt this decision and limit flexibility to return to this important issue at a later stage—for example, as part of our 2017 review—on the basis of further evidence.
	Amendment No. 111A aims to fix a maximum level of employer contributions into the personal accounts scheme and Amendment No. 111B seeks to put the annual contribution limit on the face of the Bill. There is a general requirement for employers using occupational money purchase schemes, including the personal accounts scheme, to contribute at least 3 per cent of employees' qualifying earnings. Amendment No. 111A would set the level of the employer's contribution for the personal accounts scheme at 3 per cent, effectively prohibiting employers from paying more should they wish. That is the import of the contribution of the noble Baroness, Lady Noakes.
	I do not believe we should obstruct employers who want to use personal accounts and to contribute over 3 per cent. We should be doing all we can to encourage both employers and employees to contribute more to pensions saving if they are able to do so. The Bill will help preserve existing provision but I cannot accept that we would need to unfairly restrict employers who wanted to use the personal accounts scheme to achieve this aim.
	Amendment No. 111B would put the annual contribution limit on the face of the Bill, adjusted annually, taking into account the changes in average earnings in the same manner as the qualifying earnings band. As I have just said, we have been clear that we intend to set the contribution limit at £3,600 in 2005 earnings terms and have reached a broad consensus with our stakeholders that this is the appropriate level.
	We fully expect to uprate the annual contribution limit in line with changes to average earnings on an ongoing basis, but we must remember that this is a unique feature in an occupational pension scheme. It is right that it is there to protect the existing market but, given the impact it might have on an individual's ability to save, we need to try to avoid tying the hands of future Governments when it comes to ensuring that the annual contribution limit maintains its value.
	Details about how the annual contribution limit will work will be set out in the scheme order. PADA and the DWP are working jointly on developing the content of the scheme order and non-legislative rules for a public consultation in March 2009. We believe that our approach to Clause 61 and the annual contribution limit is the right one. Stakeholders believe that a sensible balance has been struck.
	My noble friend Lady Hollis stressed the point about doing what we can to help people build bigger pots. That must be right. There is some headroom within the existing limit which will go some way—for lower earners quite a considerable way—towards her objective.
	What has struck me since my involvement in the Bill—a lot of the consensus was created and driven before I ever got involved—is that a number of stakeholders have said, "We have not quite got what we want from this. We would like it to be better from our point of view in this direction or in a different direction". Stakeholders have been prepared to sign up to the consensus and to try to make this work on the basis that it is a consensus.
	In terms of a lifetime limit and possible one-off contributions, we have sought advice from PADA. That advice has now been received by my colleague Mike O'Brien, the Minister of State, and there will be consideration of that in due course. We are also committed to reviewing these matters together with issues of transfers in and out of schemes in 2017. The flexibility in the clause, therefore, is important in that respect.
	In having disappointed everyone who has spoken today, I hope that I can at least escape with the proviso that I think we are in a place that will work, but some challenges and important issues have still been raised in this debate. I collectively ask everyone not to press their amendments.

Baroness Hollis of Heigham: Like my noble friend the Minister, I am grateful for the number of people who have spoken today because I think that, although this is a thin amendment in some ways, it seeks to open up a core issue: how you encourage people to save and make it worth saving. This is one of many ways in which to do that; I am sure that we will revisit some of the other ways. I am grateful for the contributions of all noble Lords, irrespective—as with unisex annuities—of gender.
	I want to comment on Amendment No. 111A, in the name of the noble Baroness, Lady Noakes, which is grouped with my amendment. She emphasised several times that personal accounts involved a default scheme. I am sure that she is aware that if a woman on half median earnings of £11,000—she is the figure whom we are seeking to help—were in an average DC scheme, the employer would pay, on average, 6 per cent on the whole of her earnings from £0 to £11,000. In a personal account, half that would be paid on half of her earnings. Effectively, 1.5 per cent would be paid; that is all.
	Some employers, especially micro-employers, might not want to go into the market to set up a separate fund; they are currently paying, for someone earning £11,000 a year, £3 a week. The noble Baroness's amendment would force them into paying perhaps £5 a week—£2 extra. They would be forced into the inconvenience, the hassle, the cost, the trouble and the inflexibility of going into the marketplace when they do not want to for the sake of £2 a week. I cannot believe that the noble Baroness, who is always so concerned to remind us of the burdens on business, is opposed to all burdens on business except where the employer might seek to avoid such a burden with a personal account by paying a contribution for an employee that is over the minimum. At that point, the noble Baroness would impose on the business the burden of going for a market option that it may not wish to seek. I find that, if I may say so, an extraordinary volte-face from the noble Baroness. It appears that she is so concerned with the meta-language of what may happen to the stability of bigger funds—I accept that—that she is willing to impose burdens of that size on micro-employers for £2 a week; she cannot regard that, on reflection, as reasonable.
	The noble Baroness made some entirely valid comments on my amendment about NIRS2 and tracking. With personal accounts, we must, by definition, track in the contributions. We will therefore know, by definition, the years for which contributions have not been made. I do not see a problem; if you know that you are contributing from, say, 2015 to 2019, and you contribute again from 2022, by definition you know that between 2019 and 2022 you have not been contributing; the records will show that. The headspace is there and is available to be filled. NIRS2 was different.

Baroness Noakes: The noble Baroness should think about how that will work in practice. Unless there is a need to know the annual build-up of the contributions within the personal accounts scheme, why would that scheme need the kind of architecture that allows this detailed tracking, year by year, which is maintained, as I outlined, for up to 60 years? Once the money is in, within a certain limit—I refer to those years for which there might be corrections—there will be no need for the personal accounts scheme to have that detailed history of how it was built up, because it would just be in an allocated pot that was accumulating. The history will be history and of no relevance. That I why I believe that additional burdens will be put on to PADA.

Baroness Hollis of Heigham: I accept what the noble Baroness suggests but I find it extremely unlikely in relation to a personal account, for example, because of problems deriving from similarities of names and addresses or movements from house to house, property to property and job to job. I would be amazed if companies did not think it wise to keep those records. The noble Baroness may be right—I defer to her greater expertise on this—but it would be very rash indeed not to keep records to track, if only to avoid possible arguments about the size of the pot, the investments made and any access to following benefits.
	The problem with NIRS2 was not about tracking the records but the fact that NIRS2, as I know to my bitter experience, failed to notify people of their deficient contributions. The records were tracked; the problem was with the deficiency notices.
	Finally, my noble friend cheered me up slightly when he said that it was perfectly reasonable that these things were under review. He talked about the need to keep this simple and not to make PADA's job more difficult. However, he should consider the fact that flexibility is not the opposite of simplicity; it is the opposite of inflexibility and rigidity. The requirement down the years would be to revisit something because not enough headspace was built in in the first place. I am sure that my noble friend is well aware of that. With that moral homily, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.
	[Amendments Nos. 111A to 111C not moved.]

Baroness Greengross: had given notice of her intention to move Amendment No. 112:
	Clause 61, page 31, line 21, leave out "may" and insert "must"

Baroness Greengross: In view of the Minister's comment that this will still be under review, there is a glimmer of hope. On that basis, I will not press the amendment.

[Amendment No. 112 not moved.]

Baroness Noakes: moved Amendment No. 112A:
	Clause 61, page 31, line 23, at end insert—
	"( ) There shall be an absolute prohibition on transfers between the pension scheme established under section 58 and other pension or savings schemes."

Baroness Noakes: I will speak briefly to this amendment and Amendment No. 112A; we have covered some of the territory. This deals with transfers. I was grateful to the Minister for pointing me to the way in which the rules on transfers in and out will be constituted.
	Transfers are rather like top-ups in that it is not absolutely clear that it will be right for people to transfer money out of existing pension rights in other schemes and into the personal accounts scheme. The Minister will be aware that there is a concern in the pensions-providing industry that personal accounts will suck in money and that the scheme could advertise itself as sucking in all these additional pension pots. There is a problem there. There is also the bells and whistles aspect that has been mentioned. The chairman of PADA has warned about that in relation to damaging successful implementation.
	I have tabled two amendments. One says, "No transfers at all", and the other says, "Transfers from 2017". We understand that the Government's position is that there will be a review, with the possibility to transfer in from 2017. The industry is happy with there being no transfers before then. What is the Government's view of timing in this regard? Will there be a review ahead of 2017 to allow transfers potentially from 2017, or a review after five years of operation of the scheme, leading to transfers possibly being allowed from perhaps 2019? That would be an important piece of information. I should be grateful for the Minister's latest view on the Government's position on transfers. I beg to move.

Baroness Hollis of Heigham: I want to use this debate as a hook with which to raise an issue that I am worried about. It has been raised by TPAS, whose 25th anniversary noble Lords have referred to, and I suspect that it may be a concern for many noble Lords. We may explore it more fully on Amendment No. 134ZB. It involves the issue of stranded pots and the capacity to transfer them in.
	I am batting beyond my technical range here; I hope that noble Lords will forgive me if I am mistaken, but I believe that what I am saying is accurate. Let us assume that an employee in her 50s joins a personal account in 2012 and, over the next five years, puts in the maximum, which comes, in today's prices, to £18,000. I agree that that is unlikely but it is possible. That sum could not be trivially commuted; she would be forced to annuitise it. Let us suppose that that employee already has two small personal pots, each in personal pensions, of £2,000 each. If those two small pots were based on occupational pensions, with an employer contribution or whatever, the 2008 Budget would allow her, as I understand it, to trivially commute them in addition to her £18,000 coming in from her personal account. In other words, they can essentially be ignored.
	However, if her two small personal pensions are not occupational, but personal pensions, she cannot trivially commute them; she cannot annuitise them, because they are too small and, with the noble Baroness's amendment, she cannot transfer them into her personal account. Those two £2,000 pots are completely lost; they are stranded in no-man's land. She already has savings of £18,000 in her personal account. She has an additional £4,000. If those pots are in an occupational pension she can get at them, but if they are in a personal pension she cannot and they are totally lost. I understand that to be the case; if it is, frankly, something has to be done about it.
	We can discuss this again when we get to the amendment on trivial commutation, but I am giving warning now, because I think that it is one circumstance in which problems might arise. Another circumstance is pension sharing on divorce; you may end up with a sum where the existing pension fund does not want to retain the split but the fund has nowhere else much to go. There may be cases like that where those sums need to be able to come into personal accounts. Whether that is effected through the code of practice or guidance—it does not necessarily have to be done on the face of the Bill—or through regulations, there is a bundle of such issues almost hiding under the stones, which we will uncover as we go through the Bill.
	This is the issue that most grieves me. I raised it at the TPAS reception dinner last night. The chief executive of PADA and several financial advisers said that it is a real problem. I am persuaded that we should do something about it. That may not be today. My noble friend may not yet have sufficient answers; I recognise that this is primarily a matter for HMRC rather than DWP. However, I hope that noble Lords will agree with me that we cannot tolerate a situation in which modest savings are left stranded, not belonging to anybody, and just fall back to the general scheme members. Those modest savings will have been lost to somebody for whom every penny counts.

Lord Oakeshott of Seagrove Bay: The noble Baroness is talking about stranded pots, which could be a particularly restricted, technical area. These are what some people call "zombie pots". Many people to whom one talks, particularly those who are not well off, have little pots—£2,000 here, £3,000 there. They are hardly worth the bother and people do not know what to do with them. I talked earlier about how insurance companies are putting up charges and, similarly, this is not very economic for them. It seems to me that, for the reasons that we discussed in the debate on the last group of amendments, it must make sense to have a relaxed attitude towards letting people consolidate their little pots into personal accounts.
	I cannot for the life of me see why the insurance industry is so worried about this. If it is giving a good, cost-effective service to these people already, it should not worry. It would just be offering consumer choice. From the point of view of PADA, I do not see that this is bells and whistles. To be able to have a number of small pots coming in will, by definition, reduce your cost base because you will have a higher average pot and economies of scale. For the same reasons and principles that we were talking about on the last group, we oppose these amendments and are in favour of people having maximum flexibility to bring these little pots in.

Lord McKenzie of Luton: I thank the noble Baroness for the amendment, which gives me a chance to clarify the Government's position. I believe that we have made quite clear our commitment to banning pension transfers into and out of the personal accounts scheme. Our rationale for banning the transfers of pension funds to and from personal accounts, as with the contribution limit that we have just been discussing, is to minimise the impact on the market caused by the scheme's introduction in 2012 and to ensure that the scheme remains focused on the target market of low to moderate earners. Furthermore, the transfer ban is designed to promote simplicity for employers, individuals and the personal accounts scheme, as transfers can involve complex financial decisions and processes for all parties.
	Our policy on transfers was widely supported by our stakeholders. However, as always, we must allow the scope for some exceptions. First, we propose that there will be two exceptions to the prohibition on transfers into personal accounts. These relate to pre-vested pension rights and pension credits on divorce. These are tightly defined circumstances and we do not believe that these exceptions will dilute the focus on the target market or have a significant impact on the financial services industry. We will set out the detail of the ban on the transfer of pension funds into personal accounts in the scheme order, as I explained earlier. We plan to prohibit transfers out of personal accounts under Clause 111 of the Bill and we intend to amend the rules in the existing legislation, the Pension Schemes Act 1993, to prevent members from transferring out of the personal accounts scheme.
	We recognise that the transfer-out ban could complicate the decumulation arrangements for individuals over 55 who may want to aggregate all their pension pots in different schemes into one pension fund in order to purchase an annuity. My noble friend Lady Hollis and the noble Lord, Lord Oakeshott, in particular, have touched on this. Making an exception for stranded pots is a further area that we want to consider in some detail before we introduce the transfer-out regulations. We will look at that seriously. PADA and DWP are currently working jointly on developing the likely content and approach of the secondary legislation, the scheme order, and non-legislative scheme rules for a public consultation in March 2009.
	Amendments Nos. 112A and 112B would place a blanket ban on all transfers, in and out, until 2017. I have some sympathy with the idea of a bedding-in period, effectively allowing the personal accounts scheme and the existing industry to adjust before 2017, when transfers may again be permitted. Indeed, our commitment to a ban on transfers and a subsequent review in 2017 will achieve this. However, as I have explained, we cannot support the idea of a blanket ban. It is important that we allow limited scope for a number of closely defined transfers that will benefit scheme members but will not impact adversely on the pensions market.
	Even in the short time between establishing personal accounts and the 2017 review we do not believe that it makes sense to prevent, for example, transfers of pension shares on divorce into personal accounts. We will keep the position on transfers under review as the personal accounts scheme evolves and the wider market impacts become better understood. The 2017 review will address this issue specifically.
	In response to the question put by the noble Baroness, Lady Noakes, the current proposition is that the review will take place in 2017. It will decide what will happen to the ban: whether it will be lifted and within what timescale. I hope that the noble Baroness is reassured by my iteration of our commitment to limit transfers in all but an extremely limited range of cases and I ask her to withdraw the amendment.

Baroness Noakes: I thank the Minister for that response and I thank other noble Lords for taking part in this interesting debate, which has highlighted the issues involved on both sides. I am happy with the Minister's response. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.
	[Amendment No. 112B not moved.]

Baroness Noakes: moved Amendment No. 112C:
	Clause 61, page 31, line 26, leave out subsection (5)

Baroness Noakes: We are still in Clause 61 but this is a slightly different point. Amendment No. 112C proposes to repeal subsection (5) of Clause 61. We have just been discussing what restrictions on personal accounts, if any, should be placed in the Bill. The Government have generally signalled in their emerging policies that they do not want anything in the Bill.
	This amendment is different and subsection (5) is a completely different part of the clause. It is predicated on there being limits and restrictions of some nature set under the order-making powers. However, subsection (5) allows the Secretary of State to repeal the section and thereby to repeal his or her ability to set by order the limits that would apply. The only parliamentary control on this section would be the affirmative procedure, which we have already had the pleasure of discussing today, and I shall not repeat the views of these Benches on the efficacy of that procedure.
	We can obviously have a healthy debate, as we have partly had today, about what sorts of limits are appropriate for this scheme, bearing in mind the different desires of different groups of individuals and businesses. However, it is difficult to see whether there would be any circumstances in which the Secretary of State would give up the power to set limits and restrictions, thereby allowing the personal accounts scheme to extend beyond its target market without any reference to Parliament.
	The personal accounts scheme will be a public body operating with huge financial clout. The way that it operates could create market imperfections and we believe that it would be irresponsible of the Government to dispense with their ability to set limits. If it were ever determined that the personal accounts pension scheme should be allowed to set its own rules as to what moneys it would accept and on what terms, that would be tantamount to giving it licence to demolish the private sector pensions industry.
	The Minister may well say that the Competition Commission and the Office of Fair Trading are well placed to handle such issues, but there really is no reason why the Government should create a body which might turn into an unconstrained near-monopoly. The Government have a duty to ensure that their quango does not act in that way; hence, they need to retain the full powers in Clause 61 and there should be no possibility of them not having those powers to exercise.
	If the Government ever thought that it was appropriate for the personal accounts pension scheme to operate without limits—we find it very difficult to see how that position could ever be reached unless, by then, the personal accounts pension scheme had swallowed up all private sector savings—we do not believe that it would be right for this mechanism to be achieved by way of an affirmative instrument. Instead, it would be right to come back to Parliament by way of primary legislation at whatever opportunity presented itself so that at that point Parliament could consider on the normal basis whether it was right for the Government to give up their powers. I look forward to hearing from the Minister whether he has any good reason for including the power in subsection (5). I beg to move.

Lord Oakeshott of Seagrove Bay: Although the noble Baroness's warnings about gobbling up all private sector saving in this country as we know it, or whatever the warnings were, do not curdle my blood and I think that they were a bit overdone, I agree with her that we do not need this extraordinary self-liquidating subsection at the end of the clause. I put it to the Minister that you can always set very high limits if you want. The Secretary of State can say that the limit is £1 million—you can have any limit you want. Therefore, I find it very odd to set out the contribution limits and then to say, "But we may just blow this whole thing up after all". So, like the noble Baroness, I cannot see that this subsection is appropriate and I support the amendment.

Lord McKenzie of Luton: As I said earlier, we have always made it clear that the personal accounts scheme should complement and not replace existing pension provision, and the annual contribution limit and transfer bands are just two of the measures designed to achieve that. We have made our position on these measures clear in various publications and statements, and the contribution limit has been extensively debated here today and in the other place.
	As is said, our policy on the contribution limits has been widely discussed and there is broad consensus with our stakeholders about the £3,600 level for the annual contribution limit. As part of this consensus, it has been widely acknowledged that there is a need to review the policy at some point after implementation. That is why we are committed to having a review in 2017 of two of the features of the scheme: the contribution limit and the prohibition of transfers to and from the scheme. That has been agreed by the Secretary of State and announced in previous publications. The review will enable the Government to assess whether these measures have been successful in promoting market stability as intended without detriment to individuals within the scheme.
	Following the review, and if the review evidence clearly indicates that the contribution limit should be abolished, the Secretary of State may decide to remove the requirement to have a contribution limit in the personal accounts scheme. Clause 61 allows the Secretary of State to do just that. Of course, if the review evidence indicates that the limits should remain, the Secretary of State is not required to use this power and the limits can remain and be adjusted as necessary.
	Amendment No. 112C would remove the Secretary of State's ability to remove the requirement for personal accounts to have a contribution limit. In other words, should the 2017 review find conclusively that a contribution limit was not necessary—for example, if it found that the limit was hampering saving and was not needed to maintain market stability—it would be difficult to remove the requirement to have a limit. Personal accounts would then be required to operate a limit until a suitable opportunity to amend primary legislation arose.
	I hope that the noble Baroness accepts my assurance that the Secretary of State will exercise this power only in such circumstances as I have described. I should add that Parliament will be able to debate fully the exercise of the power, which uses the affirmative procedure. I hope that that goes some way towards addressing the noble Baroness's concerns and that she understands that the purpose of the power is to allow the Secretary of State to act on the findings of the 2017 review, should it be required. I hope that that is clear but I see that it may not be and that some questions may be coming my way.

Baroness Noakes: First, I thank the noble Lord, Lord Oakeshott, for his support for the amendment. I found the Minister's response a little troubling. He said that a review would be held in 2017 and that it would review the limits, which is an issue for Clause 61, together with transfers, which, as he established earlier, are not an issue for Clause 61. Therefore, the issue of transfers is on one side; we are talking about limits, and in particular the limit under subsection (1).
	My point is that, even if the Government carried out a review in 2017—an idea that we support—they could never realistically come to the conclusion that they should write their power out of the Act. I completely accept that they could use their power to set much higher limits if they were satisfied that no market imperfection was caused and that there was genuine consumer demand for it, but I think it is very unwise for the Secretary of State to say, "I'll never ever need that power again", because what the Government find in 2017 may not be what they find at some later date.
	This will be a state-backed pension scheme and therefore we have to bear in mind that it will be a bit of a brute in financial importance terms, given the sheer volumes of money flowing through it. It is not responsible of the Government even to have a power to repeal the need to place limits, and therefore I hope that the Minister will look carefully at this again. It would be unsatisfactory to leave subsection (5) in the clause because it would be difficult to conceive of any situation where a Secretary of State could satisfy himself that for all time there should be no power to set the limits as described in this clause—that is, not only the annual limit but also the possibility of setting additional amounts under subsection (3). I do not know whether the Minister would like to add anything to what he has already said.

Lord McKenzie of Luton: Perhaps I may make just a couple of points. The noble Baroness is taking an interesting position in that she is seeking to encourage the Secretary of State to stay involved and hang on to power. That is not what we usually hear from her. It may well be the case that the review in 2017 will say that there should be some relaxation to the limit, as that is what the evidence points to, but that there is no conclusive evidence that it needs to be abandoned for all time, in which case the Secretary of State does not need to operate under Clause 61(5). Quite how he would operate in those circumstances, given the vote that took place earlier, which abrogated our power to bring forward orders under these schemes, is another matter. Perhaps I should not press that point too far.
	The noble Baroness makes a reasonable point. If at that juncture there is not sufficient evidence to say that there should never be contribution limits, it may not be a wise use of the power, but it might be clear at that point that that position is taken. Having a contribution limit at whatever level imposes a cost on the scheme and on members, because it has to be implemented, policed and compliant, even if we are at a fairly high level. I do not see why the noble Baroness should be too troubled, but it is important that there is the facility to lift those contribution limits if they are not impacting adversely on the market and if they are restricting the right of the people at whom the schemes are aimed to save more fully.

Baroness Noakes: The noble Lord has suggested that the Government could not raise the limits if that was found to be appropriate. I was trying to suggest that the Government should retain the power. I do not normally argue that position, but I do so not from the position that the Secretary of State should be involved in the minutiae of the workings of the Pension Corporation, which is my normal position; it is a separate point. Having created that large state-backed financial institution with significant market power because of its size, its access to marketing budgets and so on, the Secretary of State should always retain the power to restrain the uncompetitive use of the financial muscle of that body, notwithstanding that there might be a review of limits because different limits might not be destructive to markets. We are not quite having a meeting of minds and we will not do so today, but the Minister will not tempt me to test the opinion of the House today. I will take the matter away and consider it for Report.

Lord McKenzie of Luton: I am happy to reflect on the noble Baroness's comments on the provision. I do not think that we will shift our position, but we need to think it through and I hope that one way or another we will be able to convince the noble Baroness of the reasonableness of it and why it is important to have the provision available. I hope that she will support us when we bring back an amendment to reinstate the power that she so cruelly removed from us earlier on.

Baroness Noakes: I should have responded to that point. When we removed the power we recognised that it was open to the Minister to bring back a power to amend subsequently. The noble Lord, Lord Oakeshott, and I, as we happily tripped through the Division Lobby, said that a power to amend would be appropriate but not the initial requirement to set up the pension scheme. We remain open to such an amendment. I am glad that the Minister is going to take away the point and review it. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.
	Clause 61 agreed to.
	Clauses 62 to 65 agreed to.
	Schedule 1 [The trustee corporation]:

Baroness Noakes: moved Amendment No. 112D:
	Schedule 1, page 56, line 11, at end insert—
	"( ) Appointments of members other than the chair of the corporation made in accordance with sub-paragraph (1) shall be made after consultation with the chair of the corporation."

Baroness Noakes: We now come to Schedule 1 and some of the detailed rules governing the trustee corporation. In moving the amendment I shall speak also to Amendments Nos. 112G, 112P and 112R. These concern the role of the Secretary of State in appointments to the trustee corporation, removals from it and pay while they are members of it.
	The scheme of Schedule 1 is for the Secretary of State to appoint the members and chair of the trustee corporation when it is set up and for an initial period. We know that Secretaries of State like to leave their personal mark on bodies that they set up by appointing the initial members, whatever the involvement of the Office of the Commissioner for Public Appointments.
	We accept that there is no practical possibility of the trustee corporation appointing itself at the outset and that the initial appointments will be made by the Secretary of State. But we believe that it is wrong in principle that the Secretary of State should foist a large number of members of the corporation on a new chairman. Accordingly, Amendment No. 112D proposes that the Secretary of State must consult the chairman about appointments of other members. The chairman must be able to work with his members and it is dangerous if he has no say whatever in their selection. This is good practice and I hope that there would not be any other procedure that could conceivably be followed.
	Amendment No. 112G restricts the initial period in which appointments will be made by the Secretary of State to 12 months. I can see in the build-up period of the trustees, that it would not be appropriate for a small number to appoint the rest but we must not let that unusual power last for too long. In fact, 12 months may be too generous an allowance for the task of building the board. But the point of my amendment is that the time should be finite and on the face of the Bill.
	Amendment No. 112P amends paragraph 5 which allows the Secretary of State to remove members from office. I can see no need for this provision after the initial period. The circumstances listed in paragraph 5 are perfectly well handled by the corporation itself on an ongoing basis. I could see that the Secretary of State might have a reserve power if he came to the conclusion that the board overall was not fulfilling its remit, but there is no such targeted power in the Bill and the power in paragraph 5 is simply inappropriate on an ongoing basis to deal with the board's composition.
	Lastly, Amendment No. 112R amends paragraph 7(l), under which it is up to the Secretary of State to determine pay. My amendment says that it is the corporation, after consultation with the Secretary of State, which will set pay. I see that the Secretary of State should have a formal role in consenting, but there is no need for him to get involved in pay matters. His civil servants have no expertise in pay, especially in the specialised area of running a pension trustee corporation, and there is no point in filling up their days with such matters. The Minister will have to talk a good story to justify the Secretary of State's paws remaining over the pension trustee corporation. I beg to move.

Lord Oakeshott of Seagrove Bay: I support Amendment No. 112D. It is obviously sensible, although the ultimate power is with the Secretary of State, that he should consult the chair and the corporation. I am open-minded on the other issues and I await the Minister's answer.

Lord McKenzie of Luton: Schedule 1 sets out the provisions in relation to the non-departmental public body, the trustee corporation, created under Clause 65 to run the personal accounts scheme. The amendments in the name of the noble Baroness, Lady Noakes, relate to the appointment, removal and remuneration of members of the trustee corporation as she has explained.
	First, I should explain that all the appointments in the initial period will be ministerial and so must be made in accordance with the guidance issued by the Office of the Commissioner for Public Appointments. This guidance ensures that appointments to public office follow a fair, open and transparent process. We want the trustee corporation to be given as much freedom as is reasonable for a public body, to get on with the job of running the scheme. So, from the end of the initial period, the trustee corporation will be responsible for recruiting its own members as and when vacancies arise.
	Amendment No. 112D requires the Secretary of State and the corporation itself to consult with the chair of the corporation when making appointments. During the initial period, the Secretary of State will consult with any previously appointed members of the trustee corporation on new appointments. This membership would include the chair of the corporation. As a sole corporate trustee, all members of the trustee corporation will have an equal voice and equal weight in decision-making. Each member is a valued participant in the administration of the scheme. The chair does not have a greater say than other members, a distinction from the role of chair that one would often see.
	When responsibility passes to the corporation, it is important that the corporation as a whole satisfies itself of the suitability of the potential appointee. This would, of course, automatically include the chair of the corporation.
	Amendment No. 112G relates to the length of the initial period. At this point we do not have all the detail for the preparation of the recruitment timetable. The delivery authority will advise us on this process in due course. We need to consider advice before making a final decision. There may be good operational reasons for it to be longer than 12 months, but equally it may be less. Our intention is that the initial period will not be any longer than is absolutely necessary, and in any event will end at the latest by the time the scheme opens for business in 2012.
	Amendment No. 112P relates to the ability of the Secretary of State to remove a member of the trustee corporation from office. As the sponsor of a public body, the Secretary of State has a responsibility not only to the public, but to Parliament. The ultimate responsibility, to ensure that the provisions agreed by Parliament are carried out via the corporation, remains with the Secretary of State. Therefore, it is right that the Secretary of State must be able to assure himself and, if necessary, Parliament that the members of the trustee corporation remain suitable for their position of trust and responsibility. This is not a power to be used lightly. Although the power seems wide, it would be used only in exceptional circumstances. It is usual practice to include this power in legislation when establishing a non-departmental public body.
	Amendment No. 112R would remove the Secretary of State's ability to determine the level of remuneration of members of the trustee corporation. Although he would have to be consulted, no consent would be required. It is normal practice for the Secretary of State to set remuneration in relation to senior public appointments. The Secretary of State himself may not be particularly well versed in market rates, but he would take appropriate advice. The funding for the trustee corporation, including trustee remuneration, will come from charges to the scheme members. So although the corporation will be self-financing, the Secretary of State will retain an interest as Minister for the sponsoring department and the settlor of the scheme.
	This amendment would, in effect, leave the trustee corporation to determine its own levels of remuneration. That would be a highly unusual situation and one that could open the members of the trustee corporation to accusations of feathering their own nests. We of course doubt that this would happen but, in such an important matter, even the appearance of preferential treatment would be damaging. I hope that has been helpful to the noble Baroness. I have explained each of the points about which she had concerns and I hope she feels able to withdraw her amendment.

Baroness Noakes: I thank the Minister for that reply and I thank the noble Lord, Lord Oakeshott, for his support for Amendment No. 112D. I found the Minister's response to Amendment No. 112D a little perplexing—that the chairman would have no greater say than the other members, which is unlike a normal corporation. A chairman in any situation has responsibilities to bring the organisation together, to manage business, to ensure that the board is effective and so on. That is why the chairman should be the person who has a say in the appointment of members. That is normal commercial practice. I think it is the practice in the non-profit sector and it is the practice in the majority of the public sector. I am mystified by what the Minister has said. Perhaps he could explain that further.

Lord McKenzie of Luton: I can try to. I offer a distinction between someone whose job it is to chair the board, to ensure that meetings are conducted properly and so on, and a chairman of an organisation who might have some responsibility for the strategic direction of that organisation and a leadership role. That is not the role that we see for the chair of the trustee corporation; we believe they should act collectively—I can see the noble Baroness is not convinced by this. In any event, as a practical matter, the Secretary of State will consult those who are already appointed, and that would include the chair but there would be no special consultation with the chair.

Lord Oakeshott of Seagrove Bay: Perhaps I can offer the Minister a word of advice: when you are in a hole, stop digging.

Baroness Noakes: The noble Lord, Lord Oakeshott, gives good advice. I do not think the Minister has understood what the chairman of a trustee corporation does. Such positions exist already in the private sector and nowadays they are big jobs; they attract some quite heavyweight candidates. Such people are in a position of leadership because a huge number of issues need to be handled by the board. It is not a case of all members being in it together and someone drawing up an agenda and watching the clock during the meeting. Very big issues need to be dealt with. We may well look at this again.
	On the other issues raised by my amendments, the Minister basically said he had no idea for how long we needed an initial period, which is what we are pretty used to in some of the responses on the personal accounts scheme. We might get tired of hearing that. On the removal of members and their remuneration, the Minister has repeated the fact that the Secretary of State wants to keep a hold on those things because it is a public body. We will think about that further, but for the moment I believe I have flagged up the fact that my serious concern is with the Government's concept of what a chair of this organisation will do, which means they may go out and recruit the wrong kind of person. We shall find another way of exploring that on Report. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Lord Tunnicliffe: I beg to move that the House be now resumed. In moving the Motion, I suggest that the Committee stage begin again not before 8.35 pm.

Moved accordingly, and, on Question, Motion agreed to.
	House resumed.

Business

Lord Bach: My Lords, we are about to debate a very important subject. The list contains many expert speakers with a variety of different viewpoints. Alas, we have only one hour. To be fair to everyone, I ask noble Lords to keep their contributions to two minutes. If the clock shows two, you have gone on too long.

Israel and Palestine: Negotiations

Lord Turnberg: asked Her Majesty's Government what support they are giving to Israel and the Palestinian Authority in their peace negotiations.
	My Lords, I am very grateful for the opportunity to open this debate. This is a very opportune moment for us to consider what roles the UK might play in the ever changing and confusing set of events being played out in the Middle East. I am sorry that the many noble Lords who have kindly put their names down to speak will have only two minutes, so I hope they will not waste too much time thanking me.
	They say a week is a long time in politics; even a day seems a long time in the Middle East. On the one hand, we have cause for optimism in the discussions between Syria and Israel, brokered by Turkey; between Hamas and Israel, initiated by Egypt; between Hezbollah and Israel, brokered by Germany; and those between the Palestinian Authority and Hamas—a bewildering series of simultaneous initiatives. On the other hand, we have Hamas continuing to arm itself and maintaining its rhetoric of death and destruction for Israel; Syria and Iran increasing their hold on Lebanon through support of Hezbollah with thousand upon thousand of increasingly sophisticated rockets; Israel maintaining a severe grip on the West Bank; and Iran spouting destruction for Israel, while building its nuclear capability. Even today we have the terrible news of a lone Palestinian running amok in Jerusalem with a bulldozer and killing several Israelis who were going about their business.
	All those have a bearing on how we consider the talks between Israel and the Palestinians and I will comment, rather briefly I am afraid, on some of them. First, the ceasefire between Hamas and Israel, brokered by Egypt, did not happen overnight. It must have taken many months of secret negotiation, but it is clear that this is a ceasefire and not a peace agreement. Many, in Israel at least, are quite unconvinced that it will last while Hamas remains committed to Israel's destruction. But let us be thankful for small mercies: the residents of Sderot can begin to emerge from their cellars as there is a lull in the perpetual rain of rockets to which they have been subjected for the past couple of years, and the civilians of Gaza can breathe more easily as Israel refrains from responding. Of course, this may be seen simply as a lull or as the beginning of a beginning of a process. Certainly when Israel withdrew from Gaza it was not to start a war but to start a peace.
	Is there anything that the UK Government can usefully do to help Egypt in this endeavour? I ask the Minister whether we can offer support and perhaps technical assistance for the efforts to prevent the smuggling of arms from Egypt into Gaza and for the release of Corporal Shalit. Can we also take advantage of the extremely valuable role Egypt can play in the negotiations between Hamas and the Palestinian Authority? Palestinian unity would make it rather simpler for them and the Israelis to negotiate. Then there is Hezbollah; even there, indirect discussions brokered by Germany have seen some softening, with prisoner exchanges for Israeli soldiers—we still do not know if they are alive or dead—and even the Shebaa farms appear to be on the agenda.
	However, the most significant talks of all are those sponsored by Turkey between Syria and Israel. Syria holds the key and vital opportunities must not be allowed to slip there: we in the UK can play an important role. Syria is closely allied with Iran in many ways, but while Iran is ideologically and theologically driven to destroy Israel, Syria is rather more pragmatic. President Assad is under pressure to improve the parlous economic difficulties his country faces. Neither his own position nor that of his minority ruling Alawi sect is entirely secure. He would gain considerable clout internally if he were to regain the Golan Heights. That is on the table, but would come at a price: a peace treaty with Israel, the cessation of support for terrorist groups in Lebanon and Gaza and a reduction in ties with Iran—a set of tall orders indeed.
	The Golan alone is unlikely to be enough for Syria to accept Israel's terms, yet Israel by itself has little else it could offer. That is where the international community must come in. We should consider what incentives we can provide and what aid, trade and legitimacy we can offer in an effort to bring it back to a pro-western stance. Here, we should begin by trying to persuade the USA to drop its resistance to discussions with Syria. Heavens, if Israel, which has most to fear, can talk to Syria, surely the US can.
	The potential dividends are large. An agreement with Syria would see a reduction of its support for Hezbollah and allow Lebanon a little more breathing space. That would, in turn, make relations between Israel and Lebanon, which have not been historic enemies, much more normal. Hamas in Gaza would receive less military support and its leadership in Damascus would be removed—there is already talk of that, incidentally—which would, in turn, encourage Hamas to engage more constructively with the Palestinian Authority and hence with Israel. Here, we should again enlist the support of Saudi Arabia and Egypt. Their voices are rather more likely to be listened to and their aims, in this at least, coincide with our own. What discussions are the Government having with the USA to persuade them to take an interest, and with the other Middle East countries in taking this forward?
	On the negotiations between the Palestinians and Israelis, their two leaders, both very weak domestically, have been meeting frequently. Perhaps much more significantly, their negotiating teams have been deeply engaged in closely guarded discussions for months. Both sides have much to gain from a successful outcome, but both will have to make sacrifices, which have captured the attentions of those at extreme ends of the political spectrum on both sides. They will have to be faced and dealt with. Meanwhile, the details are, no doubt, being worked on; water supplies, roads and routes, security measures and so on. Yet it is already clear what overall shape the likely outcome will have.
	It is likely to include Israel's withdrawal from over 96 per cent of the West Bank and the dismantling of all but two of the settlement towns heavily embedded in the Jerusalem suburbs, with some geographic compensation elsewhere—the only settlements, incidentally, where some Israeli building is allowed in the West Bank—and the handing over of east Jerusalem to the PA. All those have already been mooted by Mr Olmert; in return, the Palestinians will have to ensure the security of the West Bank and temper their desire for the right of return of the three generations of Palestinians from pre-1948 Palestine, a demand which would see the end of Israel as Israel.
	Neither side gets all it wants, and there is resistance, but one feasible way through that depends on the fact that 70 per cent of Israelis and a similar proportion of Palestinians seem strongly in favour of a two-state solution. Certainly, that is clear if the 650,000 members of the organisation One Voice, in equal numbers of Israelis and Palestinians, are anything to go by. If the plan was announced and followed by the dissolution of parliaments on both sides and elections called on the basis of that plan, I suspect that it would be strongly supported. Of course, Hamas as well as the right in Israel would go wild, but the vote will be against them by a population sick and tired of war and killing, and they are likely to be isolated. Iran would be incensed, but there is nothing new there.
	Some would say that this is an unrealistic and wildly optimistic view of one possible outcome, but here in the UK we need to be straining every muscle to support whatever agreement is reached. We should resist the temptation to offer criticism of one or other party—usually Israel, I am afraid. That has absolutely no impact and makes us even easier to ignore. Instead of futile and counterproductive activities, such as the academic boycotts sponsored by the University and College Union, we should be seeking avenues for increased collaboration between the UK and the Middle East, especially at a time when leaders in the region are talking ever more to each other.
	What support are the Government giving to Egypt in the mediation between Hamas and Israel? What influence are we bringing to bear on the US and the quartet to induce Syria into an agreement with Israel, and what pressure are we putting on Saudi Arabia and the Gulf states to play a much more active role in promoting the peace process? Finally, what support will my noble friend give to Israel and the Palestinians as they come to announce the results of their discussion and can he expand, in particular, on the aid so desperately needed by the Palestinians, which hangs so tantalizingly on a successful outcome?

Lord Cope of Berkeley: My Lords, we must all necessarily speak in shorthand this evening. My wife's family has lived in the east part of Jerusalem for well over a century, so for the past 40 years I have been visiting the area and have been in touch with friends there of all religions. The United Nations records that, to the end of May this year, 397 Palestinians have been killed as a direct result of the conflict. In the same period, 24 Israelis have been killed. Now, it is important to us all that terrorists do not get their way by force but, equally, Israel cannot get peace by such force and repression alone. That breeds defiance and extremism, as does crushing the economy of both the West Bank and Gaza by the wall and by checkpoints and controls.
	The two-state solution is Israel's best hope for real peace, as well as Palestine's. Only agreement can bring real peace and only talking to everyone concerned can bring agreement. The outline of a solution is well known, as the noble Lord, Lord Turnberg, has just indicated. I hope that the Government will give every support that they possibly can to the talks and to any agreement thereby reached.

Baroness Tonge: My Lords, I congratulate the noble Lord, Lord Turnberg, on securing this debate. I am horrified, once again, by events in Jerusalem today and send my sincere condolences to the people involved. I was horrified, too, by the treatment of Mohammed Omer, a prize-winning journalist, who had briefed parliamentarians here this week before attempting to go home to Gaza, only to be beaten unconscious at the Allenby Bridge while an official from the Dutch embassy, who had facilitated his visit, was waiting for him. I am horrified by the rockets from Gaza terrorising Israelis, by the suicide bombers, by the helicopter gunships on their deadly missions, the monstrous security wall, the checkpoints and the permit systems. I am horrified by and do not condone any of those things, but I can understand why they have happened.
	I do not condone or understand the relentless expansion of the settlements on Palestinian land in defiance of the Geneva Conventions. I do not condone, but have tried to understand, the failure of the international community—despite strong words of criticism—to take action against Israel. I am beginning to understand the power of the Israel lobby, active here as well as in the USA, with AIPAC, the Friends of Israel and the Board of Deputies. They take vindictive actions against people who oppose and criticise the lobby, getting them removed from positions that they hold and preventing them from speaking—even on unrelated subjects in my case. I understand their methods. I have many examples. They make constant accusations of anti-Semitism when no such sentiment exists to silence Israel's critics. If Israel is not persuaded to obey UN resolutions, and especially to start dismantling the settlements in the West Bank, anti-Semitism will again stalk Europe. Israel will never have peace and the world will never be free of terrorism unless this problem is resolved first. Attacks on Afghanistan and Iraq—and Iran next—are not the answer. They have created more terrorism. The answer is a peaceful and just settlement for Israel and the Palestinians, and Israel holds most of the cards.

Lord Wright of Richmond: My Lords, I have three brief questions to put to the Minister. First, will he confirm HMG's continuing support for the quartet's search for a two-state solution to the Palestinian problem and can he assure the House that HMG will not allow the French initiative for a Mediterranean union—admirable though that may be—to divert attention from this absolute priority?
	Secondly, will he confirm HMG's support for the indirect dialogue between the Israelis and the Syrians taking place in Istanbul? On a recent visit to Syria, I detected some doubt among Syrian officials and Ministers about whether HMG, or indeed the United States Government, were fully in support of this very brave initiative on both sides. It would be good to have a strong statement of support from the Minister.
	Thirdly—and I hesitate to add a critical note to my intervention in a debate which I know is intended to be helpful to both sides, and I pay tribute to the noble Lord, Lord Turnberg, for his speech—will the Minister confirm that we continue to press the Israeli Government to end and, indeed, reverse all settlement expansion in the West Bank and east Jerusalem, as agreed in the quartet's road map and can he report any success from these approaches?

Lord Judd: My Lords, I unreservedly thank my noble friend Lord Turnberg for this debate and for the balanced and constructive way in which he introduced it. We all have a responsibility to support those brave people who have made the present negotiations possible. In talking about that, we must talk not least about the courageous people in Israel, in the armed services for example, who have resolutely opposed extremism by Israel in its policies.
	I shall make two observations. First, peace building is a complex and long-term process. Extreme patience—if that is not a contradiction in terms—is necessary. It means being inclusive and involving everybody who can possibly be involved in the process among the immediate parties and people in the region. It is not a matter of limiting talks to the people with whom it is easier to talk. It is a matter of bringing into the talks the people with whom it is difficult to talk. That is why the Hamas dimension is so important and why it is so naive to suppose that there is a homogenous position within it rather than pluralism, which we should be building on.
	Secondly, we must give people a stake in wanting peace to continue. That means that the terrible economic and social suffering that is the truth of Gaza and the West Bank at the moment has to be overcome. There is a direct link between the economic and social priorities and the priorities of the political dimension.
	It is time that we all got back to understanding why the Universal Declaration of Human Rights and the principles of international law are so important. If any situation demonstrated that we must think of people primarily as people, not as one ethnic group or another, it is the Middle East.

Lord Clinton-Davis: My Lords, the prospects for peace would be enormously enhanced if Hamas could bring itself to recognise Israel. In its short lifetime, Israel has faced Arab armies and cries of "Kill the Jews". More rockets have fallen on its towns and villages than descended on London in World War 2. Israel is never going to capitulate to that or to the shrill screams of the Iranian President. More Jews—over 800,000—were obliged to leave Arab lands and settle in Israel than Palestinians left beleaguered Israel. Of course, Israel has made grievous mistakes: the increase in settlements and the innocent Arabs killed or maimed—although they were deliberately rendered vulnerable by Hamas. The invasion of the Lebanon is yet another example of ineptitude. Faced by potential extinction, tragedies occur.
	The struggle between Israel and Hamas has been exported. In many of our universities, Jewish students have been savagely attacked simply because they are Jews. Dialogue has been replaced by violence. However, there are rays of hope. Let us hope that the ceasefire between Israelis and Arabs can become more durable and that the talks with Abbas can be worth while. An Israeli body preaches that Jewish and Arab landowners can live in peace. Some 77 per cent of Arabs want to continue to live in Israel; 66 per cent of Israeli Jews want Arab children to be taught in Jewish schools and 69 per cent of them support a two-state solution. There are tremendous hurdles in the way of peace, but there is still a viable way ahead.

Baroness Miller of Hendon: My Lords, in contributing to this important and well balanced debate introduced by the noble Lord, Lord Turnberg, I am aware that I need to be brief, so I have restricted myself to asking only two questions of Her Majesty's Government. First, have they urged moderate Arabs not simply to sit on the fence but to influence the Palestinian Authority by supporting it financially and encouraging it to involve itself seriously in dialogue? Secondly, do Her Majesty's Government think that today's horrific incident in Jerusalem will encourage Israelis to find work for and to intermingle with the Palestinians? That is something that they need to do, but these awful attacks must stop.

Lord Janner of Braunstone: My Lords, I thank the noble Lord, Lord Turnberg, for introducing this important debate, especially at this crucial and delicate time during negotiations between Israel and the Palestinian Authority. The Annapolis process is vital as an opportunity that must be grasped fully, as the consequences of failure could be dire.
	On recent visits to Israel and the West Bank, and I have made many of them, I have met leaders on both sides. They all seem to believe that 2008 is a make-or-break year, so Her Majesty's Government must continue to play whatever part it is possible for them and us to play in a positive process. I welcome the financial support pledged by our Government at the donors' conference for Palestinian economic development in Paris last December in support of a two-state solution. It is now vital that Her Majesty's Government and the wider international community help to sustain that momentum towards a lasting solution. I am sure that Prime Minister Olmert and President Abbas agree. They meet twice a month and their negotiating teams come together regularly to discuss final-status issues. We must support, help and accelerate those negotiations. The alternative to talking is a return to the terrible violence that ended the peace process at Camp David in 2000, which we saw today and a little of which we perhaps heard a moment or two ago.
	The truce with Hamas is welcome and especially necessary for the people of Sderot and Gaza. But Hamas must remain outside the mainstream peace talks while it fails to recognise Israel and its right to exist and to fulfil the quartet's other guiding principles. Every effort must continue speedily to recognise the goal of an Israel that is free from daily threats of terror, with secure borders, alongside a viable and fully functioning Palestinian state. That is what the overwhelming majority of Israelis and Palestinians crave and deserve and I hope that it will soon become a reality.

Lord Hylton: My Lords, the best single form of support that Her Majesty's Government can provide would be to bring Fatah and Hamas together. They may not immediately be able to form a national unity Government, but they could have a joint or a co-ordinated team to negotiate with Israel. That would greatly improve the chances of acceptance of any agreement among all Palestinians.
	The West has, alas, done much to divide the Palestinian side. It should support the Saudis and others who have worked to bring about a brief Government of national unity. The West should put its weight behind the Arab League peace initiative, which was first proposed in 2003. I agree with the noble Lord, Lord Turnberg, that the West and Her Majesty's Government should back up the efforts of Egypt, Turkey, Qatar and Germany in mediating distinct aspects of the limping peace process. Finally, we, and the European Union, should ensure that our money support is spent in the most constructive ways possible, which has not always occurred in past years.

Lord Mitchell: My Lords, one of the most odious aspects of the Middle East conflict is the continuous demonisation of one side by the other. Both Israelis and Palestinians are guilty, which is why so many of us, including OneVoice, are doing all that we can to bring young people of both communities together. There is a piece of graffiti that horribly and poignantly highlights this demonisation. I have seen it on the West Bank and I see it throughout Europe. It is the sign of the Star of David, followed by an equals sign, followed by a swastika. Its message is clear: by a perversity of logic, it is deemed that Israel, which was created by the victims of the Nazis, has become the new Nazi state.
	The same mindset equally demonises Israel as being an apartheid state. Apartheid in South Africa was the legalised removal of most rights from all non-white people. That is not Israel. Indeed, the opposite is true. Within its borders, Israel has an Arab minority of more than 1 million citizens, who comprise 20 per cent of the population. All Israeli Arabs and Druze have full voting rights. Eleven Arabs are vocal members of the Knesset; the Minister without portfolio is an Arab; so, too, is the Deputy Speaker. An Arab holds a seat on the Supreme Court. It is odd—is it not?—that in Britain, where we have more than 2 million Muslims, very few hold such high offices of state. But in Israel they do. Arabs can attend any university in Israel. They comprise 20 per cent of the student population at the University of Haifa. Israeli Arabs can eat at any restaurant they choose, go to any cinema they want or fall in love with any person they like and marry whomever they choose. Does that sound like an apartheid state? I do not think so.

Lord Steinberg: My Lords, I thank the noble Lord, Lord Turnberg, for introducing this debate. I am a proud Zionist, who is filled with even more pride at Israel's celebration of its 60th birthday. Israel is a vibrant society. It is completely democratic and desires peace more than anything else. If only its neighbours wanted peace, and believed in the sanctity of life and in democracy, then peace could be achieved. I welcome the Government's efforts to achieve this objective, but Iran casts a giant shadow over the entire civilised world. It would help enormously if it would stop supplying arms and know-how to Hezbollah and Hamas. We cannot expect democracy to happen overnight in the area, but we should encourage it as far as we can.
	We must not believe that some things are possible when they are not. Self-delusion is a terrible thing. So I must say loud and clear that the Palestinian refugee problem is the problem of the Arab states and not of Israel. We must remember that Israel took in nearly 1 million Jews who were kicked out of Arab countries. Israel believes that the refugees belong to the neighbouring countries and not to Israel. The problem of Jerusalem remains. Israel believes that it is the eternal capital of Israel and anyone who visits knows that all religions can practise their faith without impediment.
	These few comments come as a result of my being in Israel on a regular basis and being aware of many conversations with the public and the politicians. I hope that the Government, through the Minister, will work hard to achieve the goal of peace and I wish him and all interested parties much success.

Lord Clarke of Hampstead: My Lords, first, I must apologise to the Lord Speaker for my mobile phone going off. I did not even know that I had it in my pocket. I declare an interest as a long-standing member of Labour Friends of Israel and president of the Trade Union Friends of Israel. I, too, thank my noble friend Lord Turnberg not just for securing the debate but for the balanced overview that he gave, which has saved a lot of noble Lords from having to repeat some of his pleas and hopes for the various talks that are going on.
	Mention has been made of OneVoice. I wonder whether the Minister is aware that these brave and courageous young people have collected 650,000 signatures from Israeli and Palestinian youth. They want the authorities to accept the need to get an understanding and to make the parallel state a reality; they want politicians to stop talking and to get on with creating a better future. Besides the 650,000 signatures, OneVoice has created 1,230 young leaders who are,
	"prepared to educate and mobilise all sectors of their societies behind its goals".
	As it said in a recent publication,
	"this is just the beginning".
	Last week, I met some Palestinian doctors and teachers who were very concerned about the problems that they are facing in trying to teach deaf and dumb children in Jenin. The Jenin Charitable Society came here at the invitation of the Montessori education group and the noble Lord, Lord Pearson, arranged for some of us to meet its representatives. Time is not available to go through what they drew to my attention, but I undertake to give the Minister a note of that meeting, so that he can address issues such as the confiscation of computers.
	My time is up. For those who criticise Israel, I have one statistic: not as many bombs fell on this city—some of us were living here at the time—in all the weeks of the Second World War as rain on Israel in one week now.

Lord Watson of Invergowrie: My Lords, like the noble Lord, Lord Turnberg, to whom we are indebted for this debate, I welcome the recent meetings between President Abbas and Prime Minister Olmert and I very much hope that they will bring the two sides closer together. Perhaps the recent ceasefire brokered by Egypt, which came into effect two weeks ago, is of more immediate importance, because there is now a pressing need to ease the blockade on Gaza as soon as possible to alleviate the dreadful humanitarian suffering there, with people being denied medicines and fuel.
	Does the Minister agree that no party should take provocative actions that could break the ceasefire and that this should include the need to cease all settlement building in the West Bank, particularly in Jerusalem? I fully recognise that that is a two-edged sword, but I understand that Libya is to raise this issue at the UN Security Council in an attempt to seek a resolution on the subject. But the UK, the US and France are opposing the text. Will the Government propose an alternative text to the resolution so that at least the issue might be highlighted again in the context of the ceasefire?
	If the two-state solution that many people want to see is to be achieved, it is incumbent on both sides to make meaningful concessions. I believe that there cannot be lasting progress without a halt to the settlement building, which recently, and quite remarkably, even President Bush has criticised in strong terms.
	Last week in another place, the Foreign Secretary stated that there has not been a Middle East peace process for seven years. There is one now. It is precious and we need to ensure that we make some progress. I very much hope that the Government will play their part in bringing about that progress.

Lord Haskel: My Lords, it seems to me that this debate is about the humiliation of the Palestinians by Israel and the response of the Israelis to terror and threats to their existence. I, too, am concerned that neither side seems to know how to stop before this leads to war, perhaps even nuclear war. That is the political situation that we hear and read about; that is what the negotiations, detailed by my noble friend Lord Turnberg, are all about.
	However, there is another way. Away from the leadership, there is a lot of activity designed to encourage peace. My noble friends Lord Mitchell and Lord Clarke have mentioned the OneVoice youth movement, which brings young Israelis and Palestinians together to challenge their leaders. Physicians for Human Rights brings world-class medical attention to Israelis and Palestinians alike. My noble friend Lord Turnberg himself is active in arranging exchanges of Israeli and Palestinian medical students. Schools are being run with equal numbers of Israeli and Palestinian children. There are cultural and sports activities, as well as business activities and technology projects run from this country, designed to bring Israelis and Palestinians together. Inter-faith activities are also designed to bring them together.
	Hardly a day goes by without our learning of some new activity or development of an existing activity to bring Israelis and Palestinians together. So my question to the Minister is this: what do the Government think about all this activity? Does it simply contribute to a feelgood factor, particularly among the organisers? Or do the Government think that eventually a critical mass might be reached that will overcome the leaders' preoccupation with terror and humiliation and force peace from the bottom up?

Lord Alderdice: My Lords, the noble Lord, Lord Turnberg, who secured this debate, started us off with a thoughtful and wise speech, thereby encouraging the considerable interests in your Lordships' House to respond in a reflective way. We owe him a debt for that. The number of noble Lords who wished to participate and the passion with which they did so show the interest that there is in this place and the concern not only for Israelis and Palestinians but for the wider impact on the whole region and, indeed, the wider world.
	In the short time available to me, there are a few specific issues that I wish to raise with the Minister. The first was mentioned by the noble Lord, Lord Judd. He pointed out effectively that while you can have a political process among those who broadly agree on principle, a peace process must in essence involve those who have the most profound, deep and even violently expressed disagreements. Therefore, any process that is not inclusive and does not bring to the talks those who are responsible for at least some of the violence cannot truly, in the end, be a peace process.
	Of course, there has to be a recognition that military solutions of any kind will not resolve the problem. That is why, interestingly, in speaking with some Iraqi parliamentarians recently, the Deputy First Minister of Northern Ireland, Mr Martin McGuinness, made it clear that they would end up talking with each other. The only question was whether it would be in one year, five years or 10 years. He said that it was his experience that there was no military solution either for the British Government or for the IRA. I take the same view, with regard not just to Iraq but to the region that we are discussing tonight. In the end, those involved will talk with one another. The question is: how many lives will be lost and how much more destruction will take place before then?
	The issue raised by the noble Lord, Lord Wright of Richmond, is relevant. There was a time when the impression was given that Her Majesty's Government were supportive of all talks; then it seemed that we would not accept and would exclude Hamas, Hezbollah, Iran and Syria. Have the Government moved? Are they really committed to these kinds of engagements? It is possible to show support by explaining the painful process that Her Majesty's Government went through as they found a need, in the end, to engage with the IRA and the loyalist paramilitaries. They said that they would never engage with them but, for the cause of peace, they had to. That, perhaps, would be a real measure of support to Israelis and Palestinians in their profoundly difficult task.

Lord Trimble: My Lords, like other noble Lords, I congratulate the noble Lord, Lord Turnberg, on securing this debate. I also congratulate the many noble Lords who took part and managed to keep within the time limit in a quite remarkable way. That is worthy of note.
	There was a considerable advantage in having a time limit, which the noble Lord, Lord Alderdice—whose contribution I enjoyed—might recognise. I refer to the term "whataboutery". We used it in Northern Ireland about people who wanted to get into a debate about who did what to whom, when, who was right and who was wrong. There is no doubt that there is even more whataboutery available to people who wish to get involved with regard to the Middle East than even we experienced. I congratulate noble Lords on having a degree of restraint with regard to whataboutery tonight.
	The key point that noble Lords came back to again and again was that there is a talks process in existence. A number of people were pessimistic about the talks process when it began; it seemed a forlorn hope. But, as noble Lords said, there have been significant developments. We have seen a ceasefire from Hamas, brokered by Egypt, and there are contacts taking place with Syria, facilitated by Turkey. It is significant to see two of the major powers in the region, in terms of size, population and power, involved positively. It is a pity that the third comparable power, Iran, is not involved and is not making a positive contribution. It could make a positive contribution.
	I do not want to get involved in a discussion about the contacts, the distinction between contacts and talks and the question of whether people are being included or excluded. The key question is whether people are in a position to make a contribution, whether they are in the same ballpark, whether they will engage in serious discussions or whether discussions with them would send the wrong signals. That is a different issue entirely.
	I had the pleasure of being at a conference in Jordan recently. It enjoyed wide participation and a good range of contributions. What stuck in my mind was a sentence from Shimon Peres, who addressed the conference. He of course said that he would not discuss the talks, except to say that in all practical matters they were close to agreement, but that the emotional matters had become heavier and more difficult. That is worth reflecting on; one could see practical matters being resolved. That view coincides with what many people have thought—that a deal is there to be made if people are able to make it, but what holds them back is that it would involve huge emotional shifts. For the Palestinians, it would mean the acceptance of a Jewish state; for the Israelis, it would mean the division of the state and the division of the city to which they are so strongly attached. Those are of equal weight.
	I hope that the Israelis and Palestinians will be able to overcome those emotional problems. I hope that the wider Arab community will support the Palestinians. I know that there is plenty of support in some elements within Israel for what is to be done and I hope that Her Majesty's Government are supportive of this. I fear that the problem, spelt out for us by noble Lord, Lord Bew, in the previous short debate on this subject, is the hatred that exists. That reinforces the emotional problems and difficulties. We all hope that they will be overcome and we look forward to hearing from the Minister what Her Majesty's Government are able to contribute to the process.

Lord Malloch-Brown: My Lords, I join those who have thanked my noble friend Lord Turnberg for tabling this Question. I assure everybody in the House that the Middle East peace process continues to be a high priority for this Government as well as a topic of great interest to this House. The UK remains committed to a comprehensive peace in the Middle East.
	I thought that the noble Lord, Lord Trimble, was going to suggest that we apply a two-minute rule to peacemaking in the Middle East because it would perhaps have produced a result in Ireland, too. I look forward to the noble Lords, Lord Alderdice and Lord Trimble, proposing as a lesson from Northern Ireland time limits on peacemaking, because we have, after all, been working at a Middle East solution for a very long time and recognise that huge obstacles remain to be overcome. However, recent events have also shown that progress can sometimes be made quickly where there is the political will.
	Listening to the contributions this evening, I was struck by the need for all of us to be realistic about the role of Her Majesty's Government. We have a role which comes from our history and knowledge of the region, from our diplomatic energy and from the values that we apply. It comes, too, from the interest taken in this House as well as in another place and by so many Britons whatever their political persuasion. Nevertheless, despite deep yearning on all sides for peace in the Middle East, we must recognise that we are not a front-line player, but a supporter of the quartet and the friends of peace on both sides of this dispute. We can play a role in providing diplomatic support and suggestions as to creative means for moving issues forward; we can, as is being seen in Gaza, help generate and stimulate private sector activity; we can support security sector reform. However, we are dependent on our ability to work with the quartet, with our EU partners and with other friends and allies.
	That is one reason why we were encouraged by the Annapolis conference. Not only did it see substantial political movement from both sides but it recreated a framework where people of good will could press to move things forward. We saw President Abbas and Prime Minister Olmert commit to fortnightly meetings. We saw them both restate their commitment to the road-map obligations, which means improving Palestinian security but also a freeze on Israeli settlements. The US undertook to monitor this process as the country best placed with both sides to play that role. All parties agreed to seek to conclude negotiations by the end of 2008. The conference was a signal of renewed international commitment to the peace process. It was remarkable for a particularly strong Arab attendance. I say in response to the question of the noble Baroness, Lady Miller, that the moderate Arabs were there in force.
	We are deeply committed to supporting these peace negotiations. The Foreign Secretary and the Prime Minister have been engaged. Both have spoken regularly to the key actors involved. The Foreign Secretary visited the region on 8 and 9 June, which was his second visit this year. Both he and the Prime Minister have been very clear in their message: we support the Annapolis process and expect all parties to fulfil their road-map obligations as part of it. I therefore repeat for the noble Lord, Lord Wright, and others that this means Israel must freeze all settlement activities and that the Palestinians must work hard to improve their security sector.
	London has supported that in every way in which it is able. We were the stage for discussions on the political process. On 2 May, the Government hosted the ad hoc liaison committee meeting of major donors to the Palestinian Authority. The quartet also met on the same occasion, as did the Arab quartet. The Foreign Secretary met key figures involved in the process, offering our support.
	One area in which we can make a particularly significant contribution is support for the Palestinian economy, because if there is to be a two-state solution, we must have a viable Palestinian economic as well as political state. Economic and social development in the Occupied Territories remains a cornerstone of the Government's approach. We have committed to helping the Palestinian Authority through very difficult economic times. We continue to do all we can to support Prime Minister Fayyad's Government, who have the necessary experience to implement difficult and far-reaching reforms that will create the viable Palestinian state that is necessary if peace is to be sustainable. In December last year, the international community pledged, as noble Lords know, a remarkable $7.7 billion at the Paris donor conference in support of Prime Minister Fayyad's plan. The UK has committed £243 million in support of the Palestinian Authority over three years, linked to political progress, which represents a substantial increase in the Government's assistance.
	While we recognise that the private sector is stunted by the Israeli occupation, we felt that more could be done. There must be a viable private sector. Investors need to be drawn in early if we are to create the right climate for the private sector that will underpin the Palestinian state. Therefore, in May, the UK co-sponsored with the United States the Palestinian Investment Conference, held in Bethlehem. The Prime Minister spoke at a curtain-raiser earlier in the month with Tony Blair and Prime Minister Fayyad. Investment agreements worth £70 million were initialled. That saw more than 500 Arab businessmen and 100 Gaza businessmen enter Bethlehem, which sends an extraordinary signal.
	The third crucial element to progress between the Israelis and Palestinians is Palestinian security. One of the key obligations set out in the road map, Palestinian security, is vital. The UK has long been at the forefront of supporting reform of the Palestinian security sector. In June, Germany hosted an important conference in Berlin to galvanise support in this area. The UK announced that it will spend £2.7 million in 2008 on security sector reform and has set aside more for the next three years to improve civil justice and public prosecution.
	The EU also has a role in training the Palestinian civil police. The UK has been a long-standing contributor to the European police mission in the Occupied Territories. We provide three officers to the mission and have allocated £1.2 million of our funding to support Palestinian policing needs in 2008. We also support the US co-ordinator, General Dayton, in his effort to reform the Palestinian national security forces. The Palestinians are serious about security reform, which is absolutely critical to achieving peace. We will continue to provide all the support that we can for the will of the Palestinians to progress in this area.
	The Foreign Secretary has been consistently clear that we should not forget about Gaza. Progress there is fundamental to easing the suffering both in Gaza itself and in southern Israel. I pay tribute not just to the One Voice youth movement but to all other civil society groups which try to find ways of building peace between the two communities. I assure the noble Lord, Lord Haskel, that far from their being just noise and things to make us all feel good, they build to a critical mass and a tipping point towards peace.
	I turn to the improvements which have been referred to this evening. The products of old fashioned diplomacy matter, too. In this respect, the ceasefire agreement between Israel and Hamas is a very welcome development. The Foreign Secretary spoke to the Egyptian Foreign Minister, Aboul Gheit, and I saw him yesterday in Sharm el-Sheikh. We both commended him on Egypt's painstaking work to conclude this agreement. It is good news that the ceasefire has held so far, and it is vital that all sides do their utmost to keep to their commitments because, as was said, while it is just a ceasefire, a ceasefire precedes the building of trust and hence broader peace. Hamas and other militant groups must stop firing rockets into Israel, and Israel must work to reopen the crossings into Gaza. Equally, this agreement must be only a first step. When any Palestinian returning home is the subject of the kind of beating to which the noble Baroness, Lady Tonge, referred earlier, we must condemn it. I ask her for details of that incident, so that we can look further into it.
	The ceasefire presents an important opportunity to fully reopen the crossings between Gaza and Israel. That is crucial to addressing the dire humanitarian situation inside the country. We will press for industrial diesel and everything else to be let in as quickly as possible.
	I shall say a word on the Israel-Syria talks, a subject raised by the noble Lord, Lord Wright, and others. Peace between Israel and Syria would obviously have the potential to transform the broader Middle East peacemaking process. Therefore, let me be unequivocal in saying that we welcome the current peace talks between Syria and Israel, and commend Turkey for its mediation efforts. We see these talks as an important step forward and a way of building confidence in the region. Ultimately, Syria and the Golan Heights must be part of a comprehensive solution to the Arab-Israel conflict. This is why it also made sense for Syria to attend the Annapolis peace conference.
	However, as has been said tonight, we equally recognise that a peace deal between Israel and Syria is not easily reached. We have made it clear to Syria on a number of occasions that a fundamental shift in its regional behaviour is required if part of the international community is to reach out to it more broadly. That means that Syria should move to normalise relations with Lebanon, including exchanging embassies and demarcating borders. It means that Syria should cease its support for Hamas and Palestinian Islamic Jihad, as well as for Hezbollah, which continues with Syria's acquiescence to transfer arms through Syrian territory to Lebanon. Perhaps most importantly for the UK's own security, Syria should tackle al-Qaeda head-on.
	What has happened in recent weeks on the Syrian front and on the Israel-Hamas front show that when there is ingenuity of diplomacy and commitment by both sides, progress can be made. Therefore I too, in commending the noble Lord, Lord Turnberg, again for introducing the debate, am proud that we can all take stock of the situation better than when we last addressed it in this House.

Lord Bach: My Lords, I thank all noble Lords for behaving so perfectly during that debate. I beg to move that the House do now adjourn until 8.35 pm.

Moved accordingly, and, on Question, Motion agreed to.
	[The Sitting was suspended from 8.33 to 8.35 pm.]

Pensions Bill

House again in Committee on Schedule 1.
	[Amendment No. 112E not moved.]

Baroness Noakes: moved Amendment No. 112F:
	Schedule 1, page 56, line 14, at end insert ", of which at least 3 members shall be appointed to represent the interests of members, and prospective members"

Baroness Noakes: A short while ago we debated whether there should be the possibility of employers being appointed as members of the trustee corporation. I said at that time that I supported the appointment of members as trustees. I was surprised that the Government seem rather more equivocal, because there is no requirement in this Bill for there to be member trustee corporation members. My amendments in this group seek to remedy that.
	Amendment No. 112F requires there to be three member trustees within the nine to 15 member bracket in paragraph 1(2) of Schedule 1. Amendment No. 112H would alter paragraph 1(4) so that an order setting up a pension scheme under Clause 58 must apply Section 242 of the Pensions Act 2004. I hope that the amendments commend themselves to the Minister and I beg to move.

Lord Tunnicliffe: First, I make it clear that we fully intend to respect the purpose and intention of Clause 242 of the Pensions Act 2004; that is, to have one-third of the individual members of the trustee corporation nominated in some way by the scheme members. I say "in some way" not to be deliberately vague, but because the personal account scheme is unlike other occupational pension schemes. It will not have a sponsoring employer, or even a group of sponsoring employers. The personal account scheme is expected to have millions of members who work for many thousands of different employers. This puts the scheme in a unique situation with regard to contact with the scheme's membership.
	Turning to Amendments Nos. 112F and 112H, tabled by the noble Baroness, PADA has been set the task of designing the process for interaction between the trustee corporation and the scheme members, and the process for trustee recruitment. Until we receive PADA's advice on these processes, we will not know if we can simply amend Clause 242—or regulations under it—to include the trustee corporation, or whether we need to design a bespoke solution, such as nomination via the members' panel, which we would set out in the scheme order. This is our reason for using the word "may" rather than "must" in both this paragraph of Schedule 1 and in Clause 60(4). We need this flexibility. When we have all the relevant advice and information, we will make the appropriate decision based on it. As I have previously said, the trustee corporation is the sole corporate trustee and it must act in the best interests of the scheme members, within the terms of the trust. They cannot have special interest groups to represent.
	In relation to the specific number of prospective members, under trust law, as I am sure noble Lords are aware, a trustee's most important job is to protect the interests of beneficiaries under the trust. In this case, those interests are the pension savings of the scheme members. A trustee should not be directly required to act in anyone else's interests. Prospective members are, of course, important to the trustee corporation and the future viability of the scheme. For this reason, the trustee corporation will work with members and participating employers, through the panels, to ensure that the scheme is running smoothly and that any issues are resolved. In this way, we will make the scheme as attractive as we can both to new employers and members, within the limits set down. I hope I have indicated that, in principle, we are entirely at one with the noble Baroness, Lady Noakes, but the steps of setting up the scheme are such that the way we have put it in the Bill so far is the right way forward to achieve the principle of Clause 242.

Baroness Noakes: I thank the Minister for that reply. It is a pity that the Government had not worked out more of the answers before they brought this Bill to the House, but I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.
	[Amendments Nos. 112G and 112H not moved.]

Baroness Noakes: moved Amendment No. 112J:
	Schedule 1, page 56, line 21, leave out "and, under paragraph (1)(1)(b)" and insert "or, after the initial period"

Baroness Noakes: I shall speak also to Amendment No. 112K. Paragraph 2 of Schedule 1 deals with conflicts of interest. My amendments are not addressed to the need for members to avoid conflicts of interest, but to the Secretary of State's ongoing involvement. He is not only involved in appointing someone who does not have a conflict of interest, but has to keep an eye on this "from time to time". That is, under the terms of this Bill, the Secretary of State has both an initial and an ongoing requirement to monitor the status of members of the corporation, outside the initial period, even if he has not appointed them.
	I do not understand the need for this or the need to create within the Department for Work and Pensions the mechanism to monitor—on behalf of the Secretary of State—conflicts of interest within the trustee corporation. My amendments remove the Secretary of State from the process once the initial period has passed. The responsibility would then be with the trustee corporation, which is as it should be. That is what happens in organisations such as boards; they have to ensure that conflicts of interest do not get in the way of business, and that important ones do not exist. My amendments seek to take the Secretary of State out of the process because it would be impractical—or, indeed, involve too much public sector, Civil Service effort—to comply with this after the initial phase. I beg to move.

Lord McKenzie of Luton: As the noble Baroness has explained, the effect of these amendments would be to limit the Secretary of State's role in considering conflicts of interest in relation only to appointments made within the initial period, and the corporation's role in conflict only to appointments made after the initial period. I would like to take this opportunity to explain our reasoning for both the Secretary of State's and the corporation's continuing role in conflicts of interest.
	As has been discussed, we know that appointments to the trustee corporation in the "initial period" will be made by the Secretary of State. After this period, the trustee corporation itself will be responsible for making appointments. Clearly, it is important, bearing in mind the responsibility they will have for investing the contributions of scheme members, that there are sufficient checks on whether any conflicts of interest exist among members of the trustee corporation.
	The corporation itself will have an interest in potential conflicts of interest for the individuals who are members of the corporation, whether or not the appointment is an initial or a later one. They must act together in scheme members' best interests, but a conflict of interest for an individual member could restrict their ability to carry out that legal duty.
	Equally, even though the Secretary of State will not have a responsibility for appointments beyond the initial period, he will always retain a level of responsibility as "settlor" of the scheme. Following this, the trustee corporation, as a public body, will always be accountable through the Secretary of State to Parliament. Given the accountability of both the trustee corporation and the Secretary of State for the scheme, it is right that both should have power to ensure that there is nothing which could compromise the integrity or reputation of the trustee corporation.
	I am bound to say to the noble Baroness that I do not see any of these involving great processes of administration, but I think that they are important safeguards, both in the public interest and for the corporation. I ask the noble Baroness to withdraw the amendment.

Baroness Noakes: I thank the Minister for that explanation. Could he explain how the Secretary of State will satisfy what is an obligation on him—it is not voluntary—under paragraph 2(2) in Schedule 1, which states:
	"The Secretary of State and the corporation must also satisfy themselves from time to time that none of the members has a conflict of interest"?
	How is he going to do that? Is he going to keep tabs on all the members of the corporation or have investigations carried out on them?

Lord McKenzie of Luton: It depends on the circumstances. I do not see this as being an unduly onerous or time-consuming event. It is more likely to be relevant if issues arise in the public domain because of the conduct of one individual or another. It may be that the corporation itself, undertaking its duties, will swap conflicts of interest which need to be communicated to the Secretary of State. That would be one route. The idea that there is perpetual tracking of the members is far from reality in this case. I just do not see it as a great issue.

Baroness Noakes: I invite the Minister to read Schedule 1. It states:
	"The Secretary of State and the corporation must also satisfy themselves".
	It is one thing for the Secretary of State to be reactively waiting for somebody else to tell him that an issue has arisen—I think that is what the Minister said—or that the trustee corporation chooses to make a communication with the Secretary of State. This is quite prescriptive; it says that the Secretary of State "must" satisfy himself,
	"from time to time that none of the members has a conflict of interest".
	I am trying to find out whether this is a practical proposition in the Bill or just a misguided bit of writing, putting the Secretary of State into every nook and cranny of the corporation.

Lord McKenzie of Luton: It certainly is not the latter. If the noble Baroness reads the totality of paragraph 2(2), it says,
	"The Secretary of State and the corporation must also satisfy themselves from time to time".
	That does not mean every minute of every waking hour. It says "from time to time". That seems to me to be entirely reasonable and practical. The noble Baroness is making very heavy weather of this.

Baroness Noakes: I might be, but I am asking if this is a reactive or a proactive process.

Lord McKenzie of Luton: It might be both. It might be that from time to time the Secretary of State just needs to touch base with the corporation to satisfy himself that everything in this regard is in order. I simply do not see this as the magnitude of issue that the noble Baroness is making out.

Baroness Noakes: I am not getting any satisfactory answer from the Minister. It seems to me that he does not know how this is going to work; what "time to time" actually means; and what processes are required. I wish to test the opinion of the House.

On Question, Whether the said amendment (No. 112J) shall be agreed to?
	Their Lordships divided: Contents, 29; Not-Contents, 70.

Resolved in the negative, and amendment disagreed to accordingly.
	[Amendments Nos. 112K and 112L not moved.]

Baroness Noakes: moved Amendment No. 112M:
	Schedule 1, page 57, line 8, after "authority" insert "or the Personal Accounts Delivery Authority"

Baroness Noakes: Amendments Nos. 112M and 112N both address the issue of who is deemed not to have a conflict of interest. The Minister will be pleased to hear that they are probing amendments.

Baroness Hollis of Heigham: I am sorry—is the noble Baroness speaking to Amendment No. 112L with Amendment No. 112M?

Baroness Noakes: I did not move Amendment No. 112L. This is Amendment No. 112M.
	Paragraph 2(6) of Schedule 1 deals with people who are not to be taken as having a conflict of interest for the purposes of appointment to the trustee corporation. It mentions people,
	"being or having previously been engaged, on behalf of the relevant authority, in activities ... relating to ... pension schemes".
	The relevant authority is the Secretary of State. I am not at all sure what "engaged on behalf of" means, or who those people are. The purpose of Amendment No. 112M is to ensure that we are not disallowing people who were or who had previously been engaged on behalf of the Personal Accounts Delivery Authority in the same way as those engaged on behalf of the Secretary of State.
	I thought that, in addition, there might not be much difference between people employed by the Secretary of State or PADA and those "engaged on behalf of" them so I have proposed a new sub-paragraph (6)(c) to deal with that in Amendment No. 112N. Perhaps the Minister will shed more light on paragraph 2(6) and the people it is targeting. I beg to move.

Lord McKenzie of Luton: I previously explained why it is important that potential conflicts of interest are taken into account when considering appointments to the trustee corporation. The Bill sets out two circumstances in which it is assumed that a person will not be taken to have a conflict of interest for those reasons alone—first, if a person has been working on behalf of the Government in relation to pensions and, secondly, if a person has been a trustee or manager of a pension scheme. However, this is not an exhaustive list. The amendment seeks to add to the list individuals who worked for the Personal Accounts Delivery Authority but, as I have just said, the list is not exhaustive and therefore working for or being a member of the Personal Accounts Delivery Authority would not automatically disqualify somebody from being a member of the trustee corporation on the grounds of conflict of interest.
	A member or member of staff of the delivery authority could, like anyone else, apply for appointment to the trustee corporation. They would be considered, like anyone else, as part of the recruitment process and this would include considering whether there were any conflicts of interest. The delivery authority will be advising Government on the recruitment process for individual members of the trustee corporation, but decisions about who to appoint in the initial period will be for the Secretary of State. It is worth noting that the trustee corporation will be a completely different organisation from the delivery authority and that very different skills are required to design a pension scheme compared to those required for running one as a trustee. Therefore we would not want to make any assumptions and each case will have to be considered on its merits.
	I hope this has reassured the noble Baroness that individuals who have worked for the Personal Accounts Delivery Authority would not on those grounds alone be excluded from being members of the trustee corporation. I can see there might be some merit in making that specific on the Bill but I believe it is unnecessary. I hope I have put this clearly for the record.

Baroness Noakes: I thank the Minister for that explanation. I was mystified by seeing the examples given in sub-paragraph (6), which seemed to imply that others in a similar position might not be so excluded. I take the Minister's explanation and beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.
	[Amendments Nos. 112N and 112P not moved.]

Baroness Noakes: moved Amendment No. 112Q:
	Schedule 1, page 58, line 8, leave out sub-paragraphs (3) and (4)

Baroness Noakes: Sub-paragraph (3) says that the appointment period can be up to four years and a person may be reappointed only once, and hence the maximum period is eight years. It seems to me that this is a rather short period for something as complex as the personal accounts pension scheme. We all know that boards need to be refreshed, but the Bill proposes a shorter period than is generally used in the listed company sector, where norms do exist. In practice in the listed company sector, we are finding that the norm is lengthening.
	There was considerable dissatisfaction with slavish adherence to what appeared to be the rule in the Financial Reporting Council's corporate governance statement of a maximum of three times three years, which was driven by independence. The FRC looked at that rule last year and emphasised that a person could continue beyond nine years, provided that a board was satisfied with independence. Many boards made representations that they were being deprived of some of their most useful talent—those who understood the business—because the corporate governance rulebook made it difficult for them to do anything else. That has now changed and there is an acceptance that independence is the criterion and not some silly time period that is used to define it.
	Will the Minister explain how the policy of creating an effective personal accounts scheme is served by removing members of the trustee corporation in a period that is less than is emerging practice in the corporate sector, at a time when those people, given the complexity of personal accounts, may well be—not in all cases—at their most useful? I beg to move.

Lord Tunnicliffe: Schedule 1 includes provisions that deal with the period for which a person can be appointed to be a member of the corporate trustee. It sets the period of appointment of a member, or the chair, of the corporation at no more than four years and prevents someone being reappointed more than once. In other words, no one can serve for more than eight years. The amendment would entirely remove those limits.
	In responding to this amendment, I should first explain that we intend appointments to the corporation, which will be a non-departmental public body, to follow the principles in the code of practice of the Office of the Commissioner for Public Appointments—the OCPA. This code suggests that it is in the public interest to limit the length of appointments made by Ministers to be no longer than a total of 10 years to encourage new blood and new ideas, and to give other people an opportunity to serve on a public body. Of course, in the case of the trustee corporation, appointments after the initial period will be made not by Ministers but by the corporation.
	The good practice of limiting the term of appointment should be included in this Bill for several reasons. First, it will continue the practice begun by the Secretary of State, who will make the initial appointments to this NDPB in accordance with the principles of the OCPA. Secondly, as the scheme is being set up to fulfil a public policy objective, it will be appropriate for members of the corporation charged with running that scheme to follow the good practice of the OCPA. Thirdly, beyond the initial stage, the members of the trustee corporation collectively will be making appointments. This amendment could therefore effectively allow them to appoint themselves for unlimited periods, or might result in different members being appointed for different periods. Clearly, this could lead to unfairness and accusations of unfair treatment, and we simply cannot take that risk.
	The most effective blend of members of the trustee corporation will be a mix of fresh faces, new ideas, experience, pensions expertise and corporate memory. The appointment periods set out in the Bill will ensure that such a blend can exist. Furthermore, I believe that the limits on the period of appointments that we have chosen match the responsibilities of the trustee corporation, while remaining well within the maximum proposed in the guidelines of the Office of the Commissioner for Public Appointments. Setting a reasonable limit on the periods of appointment will strike a good balance between the independence of the members of the trustee corporation and the good practice of the OCPA.
	I hope that the noble Baroness is reassured about the reasons for these limits and I ask her to withdraw the amendment.

Lord Oakeshott of Seagrove Bay: Does the Minister accept that the brief he has just read out was very much couched—and the code suggests—to mean that it is not in the public interest for people to serve longer than 10 years? That is not, in my view, a reason to have an absolute ban on anybody under any circumstances going on for more than eight years. It seems to me that the sort of background he was giving about balance of corporate memory, experience and so on—I speak from experience of many pension fund boards—is that in some circumstances it is right that people should be able to go on longer. To move from suggestions in a code to an absolute ban does not seem proportionate. I do not think an absolute ban is sensible.

Lord Tunnicliffe: The problem with anything but an absolute ban is that it is difficult to see how you would put the controls into a body that we are seeking to make as independent as possible. There might be a general guidance if this was within the discretion of the Secretary of State, and that may be one way forward. But since we are removing it from the discretion of the Secretary of State after the initial setting up, I think it is difficult to see any device which achieves the objectives I set out, other than an absolute ban.

Baroness Noakes: I see the point the Minister is making; that without the Secretary of State's involvement beyond initial appointments there will be no levers if the Secretary of State thought that people were staying beyond their term. However, the point made by the noble Lord, Lord Oakeshott, is very valid. The Government have taken an advisory limit and turned it into a lower absolute maximum. That advisory limit is already higher than the figure that the Government have drafted into the Bill and our experience—especially from pension boards, of which the noble Lord, Lord Oakeshott, has much experience, and certainly from corporate life generally—is that this is likely to constrain rather than assist in operating this properly.
	I would think that the Government would want to avoid having to get rid of a damn good member who really knew the personal accounts scheme backwards, knew the legislation and had all the relationships, was still young, vital and whatever because eight years had come up. That is not how good organisations operate. I had hoped that the Minister might be able to take this away and think about it. In the long-term interests of creating an effective board, the Government need to provide a little more flexibility. I take the point that the Minister made about having levers. It may be that a higher overall limit, which can then be communicated in advisory terms between the Secretary of State and the board informally, would serve the needs of the pension accounts trustee corporation better than what the Government have currently drafted.

Lord Oakeshott of Seagrove Bay: Perhaps I could suggest to the noble Lord that if there has to be an absolute ban for the reasons so given, the tenure advisory guidance should be between eight and 12. If there has to be an absolute ban, perhaps the Minister would consider whether it could be two re-appointments rather than one—that is to say, an absolute ban on 12 years rather than eight.

Baroness Noakes: The noble Lord, Lord Oakeshott, makes a very useful suggestion. I hope that the Minister will be prepared to think about it.

Lord Tunnicliffe: Without giving any indication, we would be happy to consider the points put forward tonight. I invite the noble Baroness to withdraw the amendment.

Baroness Noakes: On that basis, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.
	[Amendment No. 112R not moved.]

Baroness Noakes: moved Amendment No. 112S:
	Schedule 1, page 59, line 8, at end insert—
	"(1A) The trustee corporation must establish a committee in order to keep under review the question whether the corporation's internal financial controls secure the proper conduct of its financial affairs."

Baroness Noakes: I shall speak also to Amendment No. 112T. Both amendments concern an audit committee for the trustee corporation.
	This ought to be uncontroversial. The Minister knows that when I say that, I am heading for a small disagreement with him. When we get to Clause 74 we will find that the Personal Accounts Delivery Authority will be setting up a non-executive committee which, inter alia, will keep an eye on PADA's internal financial controls in securing the proper conduct of its financial affairs. That is what audit committees very broadly do—throughout the corporate world, and pretty much the public sector as well. Why is there no equivalent for the trustee corporation?
	Of course, the corporation will be comprised of non-executives, and so a group delineated in the way that is being set up for PADA would be inappropriate. However, it should still be necessary—indeed, it should be vital—for an organisation such as the Personal Accounts Delivery Authority to have an audit committee. Internal financial controls are obviously important in any organisation but this one will have huge sums of money related to a very large number of transactions, which in turn will relate to a very large number of individuals. The controls need to operate effectively not only at the level of the whole corporation but also at the level of the individual; clearly, they need to operate so that an individual's pension entitlement is correctly calculated.
	Therefore, Amendment No. 112S alters paragraph 9 of Schedule 1 so that the power to establish committees is modified. There would have to be a committee looking at financial controls. Amendment No. 112T adds an annual reporting requirement to paragraph 17, and the work of the committee that I have just described should be included in the annual report. That is standard practice and also mirrors what PADA will be doing by virtue of Clause 74. I hope that the Minister will agree that this is a no-brainer. I beg to move.

Lord McKenzie of Luton: It gives me great pleasure to respond to the noble Baroness's no-brainer. The trustee corporation will receive all members' contributions. Most will be invested on members' behalf but of course there will be a charge for running costs—direct costs such as salaries and lease of premises, and indirect costs such as external contracts. Therefore, the trustee corporation is accountable to the scheme members for how their money is invested and in relation to whether the charges are reasonable and proportionate. As with all pension schemes, this scheme will produce an annual report and accounts, which will be audited and published. We discussed this audit when debating Clause 58.
	The trustee corporation is being set up as a non-departmental public body. This places an additional requirement on it, as its accounts, setting out moneys received from charges and what it has spent on running the scheme, have to be independently audited by the National Audit Office and laid before Parliament.
	Although the two sets of accounts are separate, they are so closely linked that it is inconceivable that one can be looked at without examination of the other. Whether the scheme accounts will form an annex to the NDPB accounts or whether it will be the other way round is a detail yet to be decided. However, I can say that the scheme members and Members of Parliament will see both sets of accounts.
	As an NDPB, the way in which the trustee corporation operates will be set out in a framework document. This will follow the guidance for all NDPBs issued by Her Majesty's Treasury and the Cabinet Office. In particular, the framework document will follow the Treasury guidance, Managing Public Money. It will specify how the NDPB must account for any money received; it will set out management and financial responsibilities; and it will clarify internal and external audit arrangements. It will also set out requirements for reporting to the department, including on financial performance. These requirements make it absolutely clear that the corporation will be obliged to make robust arrangements for internal financial control.
	I now move on to the amendments. As the noble Baroness explained, Amendment No. 112S would require the trustee corporation to establish a committee to review the corporation's internal financial controls, and Amendment No. 112T would require such an internal audit committee to produce an annual report. At this stage, before the detailed workings of the trustee corporation are fully developed, it would seem premature to specify that that should be done through a committee, although it may well be the right way forward. While that is a standard responsibility of non-executive directors on a board, the role of such a board is not absolutely comparable with the role of the members of the trustee corporation. Those members may choose to create a committee but they may prefer some other way, and at this juncture I cannot see a reason to tie their hands in relation to such matters.
	NDPBs are already required to produce an annual report and accounts and to lay them before Parliament. The accounts would normally include an audit report.
	Given the framework in existence for NDPBs, we would prefer not to prescribe further the way in which the trustee corporation should assure itself about internal financial control. However, I acknowledge that the noble Baroness has raised important matters and the committee as outlined may well be the appropriate way to proceed in due course, but it is simply that we would not particularly want to tie the hands of the NDPB at this juncture.

Baroness Noakes: I am surprised by that reply. I thought that the Minister would put on the record that they will have an audit committee, because that is the only way that I am aware of for handling such issues as oversight of internal financial controls. I am mystified that the Minister thinks that there might be another way that the trustee corporation could devise. There is no other way known in corporate life—I use "corporate" as a broad term encompassing public, private and voluntary sectors. The Minister seems to be leaving the door open for something unconventional. Will he explain that?

Lord McKenzie of Luton: As I said, it is probable that we would go down the audit committee route. The members might want to do it as a committee themselves, and want the board to be involved. I accept that that would be unusual. I am trying to acknowledge the thrust of the noble Baroness's point. We would prefer to tie it down specifically at this juncture but if there is great strength of feeling around the issue I am happy to take it away and come back on Report. We are not apart on the need to make sure that there is proper scrutiny and a group of people to look at the audit arrangements and the financial controls. That is vital. We were not ready at this stage and it has to be carried out by a committee. I will take away the matter if there is great strength of feeling.

Lord Oakeshott of Seagrove Bay: The wording is to "establish a committee" —in theory, that could be a committee of the whole board. It is not something to get too hung up on. Unless the noble Lord can give us a credible example of a workable situation where we did not form a committee, we would rather that he thought again and brought back the matter on Report.

Baroness Noakes: I endorse what the noble Lord, Lord Oakeshott, said. The Minister has said that he will take away the matter: I hope that he will. The amendment was intended as a probing amendment for the Government to place on the record the arrangements that would be in place. I am surprised, as I said earlier, that he is not able to do that at this stage, but between now and Report perhaps we can make some progress. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.
	[Amendment No. 112T not moved.]

Baroness Noakes: moved Amendment No. 112U:
	Schedule 1, page 62, line 8, after "assistance" insert "on commercial terms"

Baroness Noakes: I shall move Amendment No. 112U and speak also to Amendments Nos. 112V and 113P. These amendments concern the terms on which the Secretary of State may provide finance to the trustee corporation or to PADA. I have included the latter for the convenience of the Committee as the principles of financial assistance for personal accounts run across both organisations.
	Under paragraph 18 of Schedule 1 the Secretary of State may provide financial assistance to the trustee corporation in the form of grants, loans, guarantees or indemnities and the Secretary of State may set the conditions for such assistance. An identical power is provided for PADA in Clause 72. These provisions clearly allow the Secretary of State to provide money to underpin the personal accounts scheme as grants or on other non-commercial terms. That has caused considerable consternation among the pensions provider bodies, which will be competing with the personal accounts scheme, as they can see unfair competition written all over the Bill. Bodies such as the ABI want there to be no public subsidy for the trustee corporation and are concerned at the amount of grant-aided expenditure that PADA is racking up.
	My amendments do not go as far as that. There may be expenses that, on public policy grounds should be met by the public purse but, if that is the case, there needs to be transparency about why those costs should be subsidised. The default position is that finance should be made available on commercial terms. That is, in most cases there will be a requirement for market interest and repayment terms. My Amendments Nos. 112U and 112V seek to achieve this for the trustee corporation, and Amendment No. 113P does so for PADA. They are not in exactly the same form, which is my fault, but could easily be harmonised for Report and the idea behind the amendments is the same. During the course of the Bill, I do not believe we can settle exactly how finance should be made available to the trustee corporation or to PADA. We believe that there should be a presumption that finance should be available only on commercial terms. As I have said, I have accepted that the reality is that some subsidy may well be necessary.
	My amendments allow Parliament a modest involvement in agreeing whether finance is to be provided on a subsidised basis in future by requiring the Secretary of State to make a report to the House setting out why he needs to provide finance on a non-commercial basis. There is no other parliamentary procedure involved, but it is about transparency. As well as transparency to Parliament, it would allow other bodies, such as the National Association of Pension Funds, which has raised this issue with us, to scrutinise the reasons for subsidy and make representations if it feels that the subsidy is likely to cause an unfair advantage for the personal accounts scheme.
	At present, the only information that will be available on funding from the pension corporation or PADA will come out when the annual accounts come out, which, as the Minister will be aware, could be 15 to 18 months after financial assistance has actually been given. We believe that that time period is too long in the context of the kind of transparency that should be available about such an important issue. I hope that the Minister will agree. I beg to move.

Lord Oakeshott of Seagrove Bay: I fear that these amendments will not work. I say that from bitter experience of having studied the definition of loans on commercial terms under the Political Parties, Elections and Referendums Act. Anyone with any business experience will clearly know that totally uncommercial loans made to a bust organisation, unsecured at low rates of interest, on commercial terms proved not to have any real meaning in law. I wish the noble Baroness more luck in getting something here, but I do not think she will. Even she accepts that there is a public policy argument for a certain amount of public help. It is very difficult to draw the line.

Lord McKenzie of Luton: There is an understandable interest in the way in which the personal accounts scheme will be financed and that it should not be given a competitive advantage over other qualifying schemes. Before turning to the specific points raised by these arrangements, I think it will be helpful if I explain how the scheme's funding strategy will be developed and the principles it will need to meet.
	The Government are clear in their intent that the scheme should be self-financing in the long run. That means its set-up and operational costs being recouped from members' charges. However, in the scheme's early years, there will be a gap between its costs and revenues. The delivery authority is currently developing a strategy to bridge that gap. I am sure noble Lords will agree that we should not underestimate the complexity of this task.
	The personal accounts scheme will be unlike any other scheme. It will be the largest occupational scheme in the UK, with possibly 4 million to 7 million active members; it will interact with nearly 1 million employers; it will be specifically targeted on a part of the market which existing providers find uneconomic to serve; and it will be required to admit anyone eligible to join, irrespective of whether the revenue they might bring will cover the cost of their account.
	The scheme's funding strategy will need to reflect these unique features, as well meeting the guiding principles which the Government have set out. These principles are that the strategy should deliver low charges for members, be based on our intention that the scheme is self-financing in the long run and delivered at nil cost to taxpayers, be commercially viable, not provide the scheme with an unfair advantage, and comply with European rules on state aid. I hope this brief overview of how the scheme's funding strategy will be developed and the principles it will be based on has been useful. I will now move on to the amendments.
	Given the size and complexity of the task that PADA faces, it is important that legislation should enable the authority to carry out its work and explore all options available. We must avoid ruling out options at this stage that could later prove to be in the best interests of members. These amendments would limit the options by requiring that financial assistance to both the authority and the trustee corporation should, in the first instance, be on commercial terms. I should make it clear that, in resisting this amendment, we are in no way setting our face against commercial funding of the scheme. Funding from commercial providers or from Government on commercial terms are options under consideration. Legislation should not, however, make commercial terms the overriding objective of the funding solution. As I have said, the scheme's funding strategy will need to balance a range of factors.
	It should also be remembered that the authority will continue to incur costs in relation to activities, such as providing advice to the Secretary of State, that it is not appropriate to pass on to scheme members through charges or to expect to be funded commercially. Indeed, Amendments Nos. 112V and 113P appear to recognise that there are circumstances where commercial funding would not be appropriate, but require a detailed report to the other place before other funding can be put in place. Transparency is a key issue. I agree that there is a need for transparency once decisions have been taken and hope to reassure the noble Baroness that such transparency will exist.
	As non-departmental public bodies, the authority and the trustee corporation will have to publish annual reports and accounts that will be placed before Parliament. The receipt of funding, from whichever sources and on whatever terms, will be made clear in these documents, subject to the need to protect any commercial negotiations occurring at the time. In addition, my department will provide information on funding within supply estimates, which are laid before Parliament each year for approval. As noble Lords will be aware, supply estimates are the means by which the Government seek authority from Parliament for their own spending each year. They reflect resource and capital spending plan provisions for the financial year to which they relate, as well as showing the total net resource figures for the two prior financial years.
	Government funding will be reflected in the Department for Work and Pensions estimates; grant in aid funding is included within the sub-headline catching all DWP grant in aid payments to its non-departmental public bodies. The actual figure for grant in aid to PADA is shown separately under notes to the estimate, and if a loan is provided by the DWP it will be shown separately from grant in aid—in the same sub-headline, but as capital rather than resource. Figures presented in the main estimates at the beginning of the year are, of course, subject to changes as plans develop; those changes would be reflected in subsequent supplementary estimates.
	The authority's annual accounts will provide information on each year's funding sources and the expenditure incurred against that funding. The financial statements within those accounts will comply with the accounting and disclosure requirements detailed in the Government's financial reporting manual and any accounts direction issued by the department. The trustee corporation will also have to comply with these requirements inasmuch as it comes within the classification of bodies to which the manual applies. Details on the layout of the accounts are still under discussion, but we expect that funding from grant in aid and loans from whatever source will be separately visible within the accounts. Additionally, within PADA's operating cost statement we would expect expenditure to be recovered from future scheme charges, which will be reported separately from expenditure that will not be recovered.
	I hope that this explanation will reassure the noble Baroness both that the Government have no intention of unfairly advantaging the scheme through the funding approach—and of the importance of retaining flexibility at this stage—and that the basis for funding the scheme will be made clear to Parliament through existing reporting arrangements; I suggest that those would be pretty robust. The noble Baroness says that accounts sometimes take a little while to be produced and signed off but, notwithstanding that, I suggest that the detail that will be within them and in the department's estimates—showing what it is funding, and how—is a robust series of indicators on how the scheme is being funded. That should satisfy her on transparency.

Baroness Noakes: I thank the Minister for the explanation of the Government's approach. I want to read that carefully in Hansard tomorrow. I entirely take what the noble Lord, Lord Oakeshott, said about loans on commercial terms. I suspect that there are definitions that I could lift from, for example, the National Loans Fund that would probably meet the point I am trying to make because I do not think the DWP would ever do anything as exotic as the kind of arrangements that are sometimes used to fund political parties—not, of course, my own.
	The key issue is transparency, which is what my amendments are directed at, because they involve no other parliamentary processes, as I made clear. I understand that there will be information in the annual accounts, but I do not think that is appropriate. If a transaction takes place in April 2008, I would not find out about it until, perhaps, July 2009 if the accounts were out very quickly, and quite possibly July 2010.
	This is the first time I have heard a Minister stand at the Dispatch Box and argue that useful information can be obtained from estimates. Estimates are extremely obscure documents read by a few civil servants. I am prepared to go away and look at the DWP's estimates to see the detail currently being provided.

Lord McKenzie of Luton: That will not take the noble Baroness long with her financial acumen.

Baroness Noakes: The Minister is not getting away with any form of flattery because I am completely impervious to it. I will look at the estimates, which it had never occurred to me were an element of transparency in government expenditure. As he is aware, I am seeking to ensure that there is a proper public spotlight on what is subsidised and what is not. That is still a bit of an open issue but, for today, I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.
	[Amendment No. 112V not moved.]

Baroness Noakes: moved Amendment No. 112W:
	Schedule 1, page 62, line 14, leave out "may" and insert "is required to make"

Baroness Noakes: We are coming to the end of Schedule 1. I shall move Amendment No. 112W and speak to Amendments Nos. 112WA, 112X and 113Q. These amendments concern charges made by the trustee corporation for the personal accounts scheme and they are designed to ensure that the costs of the trustee corporation are fully recovered in charges. They are linked to the group of amendments that we have just debated, which sought to eliminate or constrain subsidy flowing into the personal accounts scheme. This group of amendments concentrates on charges rather than financing.
	Amendment No. 112W would amend paragraph 19 of Schedule 1 so that the trustee corporation must make charges in connection with the exercise of its functions. The current paragraph 19 is merely permissive and I could not see why that should remain. Amendment No. 112WA would ensure that the charges were sufficient, taking one year with another, to cover its costs. I am not seeking to get into the philosophy of charging. I am aware that PADA has issued a document on how charges should be made for the personal accounts scheme. My amendments are much more modest because they are designed to ensure that charges will be made to cover all the costs over time. I fully accept that initially it will be necessary to spread costs over a number of years—I hope not too many—but the aim has to be to cover costs with income, taking one year with another.
	Amendments Nos. 112X and 113Q deal with the costs that are being incurred in the preparatory phase, which are currently being incurred by PADA. My amendments would ensure that the costs are passed on to the trustee corporation and then recovered. The Government and PADA have been vague about this. I understand that PADA expects to spend some £36 million in the current financial year, but it is hiding behind commercial confidentiality and has refused to give any estimate of the costs that it will incur on setting up the personal accounts scheme within that total amount. I accept that it will be doing things other than simply setting up the personal accounts scheme, but this is a very real problem. If we do not get further information from PADA on how those costs are made up—I am hopeful that there will be some progress on this—we may want to revisit the issue of making more information available from PADA to Parliament on the ongoing emerging costs of the personal accounts scheme. There are precedents for that for other major schemes that have been introduced in the public sector. For today, my key point is that my amendment would require PADA to account separately for the costs related to setting up and operating the personal accounts scheme and not simply to write them off.
	Amendment No. 113Q states that PADA must separately identify these costs and then charge them to the personal accounts pension scheme once it has been established. Amendment No. 112X picks that up by stating:
	"The trustee corporation must make arrangements to recover these costs".
	As we debated on the previous group of amendments, we share the industry's concern that public money could be used to subsidise the personal accounts scheme. In the early years, when the upfront costs are being borne by PADA, it would be easy for these costs to slip from public view—government accounting rather helps that to happen—but they could be an important element of the overall costs of the scheme. Indeed, they will form the bulk of the costs that need to be recovered over a period. We must not let government accounting rules just write them off. It is important that they are kept in view and are included properly within the overall costs of the scheme to be recovered by charges. I hope that the Minister will see that these amendments are reasonable in the circumstances. I beg to move.

Lord McKenzie of Luton: I thank the noble Baroness for these amendments, which give me the opportunity to explain our intentions on how costs in relation to the scheme will be charged. I hope that it is clear from our earlier debate that our intention is for the personal accounts scheme to be self-financing in the long term, such that its costs will be met from membership charges. Paragraph 19 of Schedule 1 simply enables the trustee corporation to fulfil this policy aim by allowing it to charge to the scheme any costs that it incurs in relation to the exercise of its functions. Amendment No. 112W would require, rather than allow, the corporation to charge the scheme for the costs that I have just outlined. However, given the clarity of our intention that the scheme should be self-financing, I do not see the need to go beyond the clause's current wording.
	Although the scheme will be self-financing in the long run, there will inevitably be a period during its early years when its income from membership charges will be insufficient to recover its costs, as the noble Baroness acknowledged. This stems from the fact that it will have to bear set-up costs before it can open its doors to members and that it will need some time after that before its revenues grow to a sufficient scale.
	It is not clear whether the purpose of Amendment No. 112WA is to ensure that the scheme would not have an operating deficit for more than two years running. If so, this could lead to unreasonably high charges for members in the early years of the scheme. It could adversely affect members' income at retirement and potentially lead to high levels of opt-out at the very time when we will most need to establish the confidence of a group of people, many of whom will be saving in a pension for the first time.
	It is vital that we give the delivery authority the time and flexibility that it needs to develop a funding strategy that achieves the best balance between the scheme's initial level of charges and the time that it takes for the scheme to become wholly self-financing. I hope that it is also clear that one of our guiding principles in developing the scheme's funding strategy will be to ensure that the scheme is not unfairly advantaged. This means requiring the delivery authority to identify the costs that it incurs in relation to implementing the scheme and charging them to the trustee corporation so that they are recouped through members' charges.
	I therefore find myself agreeing with the principle that appears to lie behind Amendments Nos. 112X and 113Q, which is that any costs incurred by PADA in relation to the establishment of the scheme should be recouped from the scheme through member charges. However, just as it seems fair that members should meet the costs of establishing the scheme, it would be unfair to ask them to meet those costs that do not directly relate to it, particularly those costs arising from the delivery authority's continuing role in providing advice on the commercial and operational implications of the Government's reform programme.
	I do not think that it is the amendment's intention to pass such non-scheme costs on to members, but it is important to be clear about such matters. However, my response to the amendment is to make it clear that primary legislation is not required to achieve the noble Baroness's aims. Instead, we will place a requirement on the delivery authority to separately identify costs relating to the set-up of the scheme through the framework document that exists between my department and the authority. That document describes the respective duties, roles and relationships between the delivery authority and my department, and will be updated to reflect PADA's expanded role. The framework document will be in the public domain, with copies placed in the Libraries of both Houses and on the authority's website.
	A lot has been said about whether the Government intend to put the scheme at a commercial advantage through a subsidy. However, less has been said about the commercial disadvantages that it will face due to the policy goals that we are asking it to meet. As well as being restricted to a particular segment of the market, it will have a public service obligation to accept into the scheme workers whom the current market finds commercially unviable. This means that the scheme will have to provide accounts to individuals where it will not recover the costs of doing so. In the long term, the scheme's scale will enable it to do this as part of its normal business while delivering low charges to members and being self-financing, but in the short term, prior to achieving this scale, the obligation could make it more challenging to bridge the mismatch between early years costs and revenues.
	These obligations may ultimately mean a short-term level of charges that undermines both the scheme's policy goals and its ability to build the scale that it needs to be viable in the long term. If this is the case, it would be reasonable for the Government to consider whether it was in the public interest to compensate the scheme in some way for the burdens placed on it. This concept is recognised in European state aid rules, whose purpose is to prevent anti-competitive behaviour, while recognising that there may be cases when it is right to compensate a body for performing a public service obligation. These rules are very explicit: it is possible for the state to recognise only the cost of imposing a public service obligation; it is not possible to go any further. In other words, it is possible to ensure only that the personal accounts scheme is not disadvantaged by its public service obligation; it is not possible to tilt the playing field in its favour, nor would we want to do so. We do not yet know whether any such support will be necessary. The authority needs to complete its work on scheme design and scheme cost and engage in dialogue with potential suppliers before the parameters of scheme financing are known in detail.
	I am conscious that this has been a rather lengthy explanation, but this is an important subject, around which I am sure that we will continue to have discussions. I hope that I have at least put enough on the record at this stage to help the noble Baroness.

Lord Oakeshott of Seagrove Bay: I wanted to listen to the Minister carefully. I have been critical on one or two occasions tonight of the Ministers and the quality of their briefing. However, the noble Lord has just given a thorough and comprehensive reply, which set out the position fairly. He said that the intention is for the scheme to be wholly self-financing in the long term, which is quite clear and as far as one can go. He made the point that the scheme cannot pick and choose its clients; it is almost like being an NHS doctor in terms of having to take whomever you get, unlike commercial providers in the private sector, which can take whomever they want. That is their privilege. The Minister set matters out fairly. I would be happy to accept those assurances and I hope that the noble Baroness will withdraw her amendment.

Baroness Noakes: I, too, thank the Minister for that careful and considered response to my amendments. I will want to read carefully what he said, but he covered many of the aspects that needed to be covered. I still need to be clear in my mind that the handover of costs between PADA and the trustee corporation is adequately dealt with in his response, but I will look at that in detail in Hansard.
	The Minister criticised my Amendment No. 112WA, which refers to,
	"taking one year with another",
	on the basis that it meant that the corporation had to break even over two years. "Taking one year with another" is a standard phrase in dealing with corporations that need to break even over a period. I thought that I had been using it for 30-plus years, but I did not check it when I drafted it.

Lord McKenzie of Luton: It is a bit like "from time to time".

Lord Oakeshott of Seagrove Bay: When I was doing public policy economics in the 1960s, "taking one year with another" was always applied to British Rail, which was meant to break even taking one year with another. The years never came. It is fairly long term.

Baroness Noakes: Indeed, the aim may never have been met, but it is a standard formulation in the public sector. I was concerned to hear the Minister say that PADA would have a continuing role. I had thought that it would not continue once the personal accounts scheme was set up, but we have an opportunity to debate that later, so I shall not delay the Committee. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.
	[Amendments Nos. 112WA and 112X not moved.]
	Schedule 1 agreed to.
	Clause 66 [Functions]:

Baroness Noakes: moved Amendment No. 112Y:
	Clause 66, page 33, line 1, leave out paragraph (b)

Baroness Noakes: This is a simple, probing amendment that would delete Clause 66(1)(b), which states that the trustee corporation's powers include,
	"any other functions it is given by or under an enactment in connection with the scheme".
	Will the Minister explain how other enactments give the trustee corporation functions and what they are? Paragraph (a) gives the corporation functions in connection with the pension scheme established under Clause 58, and Clause 66(2) gives a very wide incidental power. What more is needed? I beg to move.

Lord McKenzie of Luton: It is a good question which I hope to be able to answer. The overriding function of the trustee corporation will be to run the personal accounts scheme in the best interests of the scheme members. The power to establish the scheme is in Clause 58, which sets out that it will be established by order.
	The order will be the equivalent of a normal occupational pension scheme's trust deed and will set out most of the trustee's functions or give a power for the functions to be set out in the scheme rules.The scheme order will be in secondary legislation and subject to both public consultation and parliamentary scrutiny
	However, although the order will contain most of the trustee corporation's functions, it cannot contain them all. For instance, the corporation will, in line with other occupational pension schemes, have to abide by existing pensions and tax legislation—for example, in relation to tax registration and accounting, paying scheme benefits and, importantly, to oversight by the Pensions Regulator.
	Furthermore, the trustee corporation is being set up as an NDPB, so, beside the general functions given to it in Schedule 1, it also has duties in relation to a public body that are contained in other legislation. I asked what those other functions might be. Other functions not listed in the order could relate to its being an NDPB, so it will have to fulfil duties of all public bodies; for example, complying with the Freedom of Information Act and fulfilling gender equality issues.Carrying out those duties will not be at odds with its duty to run the scheme; they are simply the duties that all NDPBs have to carry out in addition to their main duties and functions.
	The amendment would remove Clause 66(1)(b). However, I understand that it is a probing amendment, so I shall not comment further on it. I do not believe that the noble Baroness meant to impose those restrictions. If the amendment were to be pressed, it would also cast doubt on the extent to which the trustee's functions could arise other than from the Bill. As I have explained, it is important that its functions can include those arising from other pensions and tax legislation, although in all cases they will, and must, remain only such functions as relate to the scheme. I hope that that has put the matter in context.

Baroness Noakes: The Minister will hear from me words that he does not often hear: I am entirely satisfied. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Baroness Noakes: moved Amendment No. 112Z:
	Clause 66, page 33, line 7, leave out paragraph (b)

Baroness Noakes: In moving Amendment No. 112Z, I shall speak also to the other three amendments in the group. These probing amendments relate to the trustee corporation's financial powers.
	Amendment No. 112Z deletes Clause 66(3)(b). The trustee corporation will have billions of pounds of pension contributions swelling its coffers, so why should it ever need to borrow money? Amendment No. 112ZA deletes subsection (4) of the clause and Amendment No. 112ZB deletes from that subsection the reference to investing money. That returns to our theme of the independent operation of the trustee corporation. Why do the Government think it necessary to keep control of the corporation in that way? I can just about see why consent control is required in relation to borrowing, if borrowing is required, but I cannot see why the Secretary of State should have a new role in relation to investment. That is what the trustee corporation will be doing—investing tonnes of money. Surely it is neither practical nor desirable for the Secretary of State to be involved in these decisions, especially as one of the core competences of the trustee corporation will be to steer and oversee investment policies. That is not a core competence, as far as I am aware, of the Secretary of State for Work and Pensions.
	Lastly, Amendment No. 112ZC deletes subsection (5) because I did not understand what it meant. I invite the Minister to explain it. Perhaps it means that the trustee corporation can borrow and invest in its capacity as the trustee of the scheme but not otherwise without consent. If that is the case, is the Minister satisfied that it will always be clear in what capacity financial transactions are being undertaken? Money is, after all, fungible, and how can distinctions be made? I look forward to the Minister's explanations and I beg to move.

Lord McKenzie of Luton: We have made clear, here and in the other place, the Government's intention that the personal accounts scheme will be self-financing in the long term, through charges on members, and delivered at nil cost to taxpayers. However, as with most new enterprises, there will be periods when the scheme has an operating deficit. One possible source of financing for these costs could be borrowing, from either the private sector or Government or a mixture of both.
	The delivery authority is evaluating a range of funding options to enable it to make recommendations on the best way to establish and run the personal accounts scheme. However, no decisions, including whether any borrowing will be required, have yet been made. It is important that the delivery authority is given the time to complete this important work. We are determined that the scheme should deliver a good deal for scheme members through low charges, but this must be balanced against what is needed to ensure that the scheme is a viable proposition and our intention for the scheme to be self-financing in the long run.
	It is therefore vital that we do not restrict the options for financing the scheme at this stage, as Amendment 112Z would, as doing so could compromise the trustee corporation's ability to get value for money. I reassure your Lordships that if the trustee corporation needs to borrow, it will need to comply with existing guidance and legislation and show that this provides value for money, just like any other NDPB. If a government loan is required, it will also need to be affordable, represent value for money to taxpayers and comply with European rules on state aid and competition.
	Amendment No. 112ZA would allow the trustee corporation to borrow and to invest money without consent from the Secretary of State. While Amendment No. 112ZB would allow the corporation simply to invest money without the Secretary of State's consent, Amendment No. 112ZC would require the Secretary of State's consent for any borrowing and investment that the trustee corporation makes. Between them these amendments cover almost all of the permutations that you could have.
	I therefore thank the noble Baroness for the opportunity to clarify the Government's intention regarding oversight of the trustee corporation's borrowing and investment activities. For an NDPB, it is normal for functions such as borrowing and investing to require the consent of the parent department's Secretary of State, in this case the Department for Work and Pensions. This is because an NDPB's expenditure is taken into account in its parent department's budgets. The requirement for consent from the Secretary of State quite rightly provides a safeguard to ensure the wider interests of the taxpayer are taken into account, as well as the trustee corporation's own objectives.
	In the case of decisions relating to borrowing, the trustee corporation would be responsible for balancing low charges for members against ensuring that the scheme is commercially viable. The Secretary of State's consent is needed to ensure that their actions are also consistent with the sound management of public finances. In the case of investment, we would generally not expect the trustee corporation, as an NDPB—and therefore a not-for-profit organisation—to invest any money on its own behalf. Therefore, the purpose of Clause 66(4) is to ensure that, should the trustee corporation wish to invest any funds provided for its operation, it could do so only with the consent of the Secretary of the State.
	However, I assure noble Lords that this provision is not intended to compromise the independence of the trustee corporation. Although Clause 66(4) requires consent, Clause 66(5)—which was, I think, the clause that the noble Baroness asked about—ensures that the trustee corporation may act independently of Government, when acting as sole trustee of the personal account scheme. This provision would apply, for example, when the trustee corporation uses the power in Clause 66(3) to invest members' contributions on their behalf. Investing members' funds must be the responsibility of the trustee. It is right that Ministers should not have a role in these investment decisions. This is purely a matter for the trustee, acting in members' best interests.
	The noble Baroness may press me on when the NDPB would invest other than on behalf of members. I suppose there could be circumstances where there might be a short-term surplus of funding. I have not really thought it through, but one can see that there are circumstances where the NDPB might invest on its own account, rather than for scheme members. I make it absolutely clear that the investment of members' contributions is the responsibility of the trustee. It is not the responsibility of Government or the Secretary of State. I hope that has helped with these amendments.

Baroness Noakes: I thank the Minister for that response and I will read carefully what he has said. It seems that the Minister is saying that there is a distinction between the trustee corporation acting as a corporation and the pension scheme, and that these activities can be separated. It seems to me that the trustee corporation will be running the pension scheme and its costs will be those of the pension scheme. It is difficult to separate the two; they are not separate in that sense. I think about my experience of seeing how pension schemes operate in the commercial world. The trustee corporation and the scheme are one. I struggle a little to understand how this works in practice. Could the Minister help me?

Lord McKenzie of Luton: I will try. I struggled a little and had some discussions with officials, which are still under way. It was explained to me that the NDPB will have costs in relation to its members, which may not necessarily be scheme costs. There will be costs that the NDPB incurs which would be chargeable to the scheme, for example if asset management is outsourced. Whether those asset management charges go directly to the scheme or to the NDPB and are then recharged to the scheme is under consideration. The key point is that members' contributions are invested by the trustees, not by the Secretary of State. He does not have a role in that and nor do the Government. We need to develop some pro forma examples of what these accounts might look like. It would certainly help me and I think it would help the noble Baroness. I would be happy to share those examples with her.

Baroness Noakes: Doubtless officials will rue the day that two chartered accountants ended up dealing with this Bill. We are interested in quite abstruse matters. I am interested in this because it gets to the heart of whether you can separate the two and how the powers and restrictions in this Bill work in practice. I would be interested in exploring that with the Minister if he could find a way of facilitating it before Report. These are important issues; we should make sure that we understand them. I beg leave to withdraw the amendment.

Amendment, by leave, withdrawn.
	[Amendments Nos. 112ZA to 112ZC not moved.]
	Clause 66 agreed to.

Lord Tunnicliffe: I beg to move that the House do now resume.

Moved accordingly, and, on Question, Motion agreed to.
	House resumed.
	House adjourned at 10.05 pm.